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THE WORLD-STRUGGLE 
FOR OIL 



Some BORZOI Books 
Midwinter, 1924 

SOCIOLOGY AND POLITICAL THEORY 
Hany Elmer Bamtt 

THE OLD AND THE NEW GERMANY 
John Firman Coar 

THE BASIS OF SOCIAL THEORY 
Albert G. A. Balz 

ESSAYS IN ECONOMIC THEORY 
Simon Nelson Patten 

THE TREND OF ECONOMICS 
Various Writers 

THE FABRIC OF EUROPE 
Harold Stannard 



THE WORLD-STRUGGLE 
FOR OIL 



Translated from the French of 

Pierre l'Espagnol de la Tramerye 
by C. LEONARD LEESE 




NEW 



YORK ALFRED . A .KNOPF MCMXXiv 



€K>PTBiaHT. 1924, BY ALTEBD A. KNOTV, IKO. 

Published, February^ 19%h 



Bet up, electrotvped, and printed Iv the Vail-Ballou Press, Inc., Binghamton, N. Y. 

Paper furnished hy W. F. Etherington & Co.. New York. 

Sound J>v H. Wolff Estate, New York. 



MANUrACTUEED IN THB UNITED STATES OT AMEMOA 



CONTENTS 

PART I. The World's Oil. 

Chap. I. "Who Has Oil Has Empire!" 9 

n. Oil : Its Origin, Discovery, and History 21 

ni. Amazing Increase in Consumption: 

Fears of the United States 34 

PART IL The Struggle of the Trusts. 

Chap. IV. The Standard Oil Company 45 

V. The Royal Dutch-Shell 59 

VI. The Oil World's Napoleon: Henry 

Deterding 84 

PART III. The Struggle between the Powers. 

Chap. VII. The Europeanische Petroleum Union : a 
German Trust for the Control of 
European Oil which founders in 
the Great World Conflict 97 

VIII. The War and Oil 101 

IX. An Imperialism not without Greatness 110 

X. The Struggle between Great Britain and 

the United States in Mexico 113 

XI. A State-subsidised Company: the 

Anglo-Persian 129 

XII. An American Balkanism: the British 

Controlled Oil-fields 143 

XIII. Political Tendencies of the Royal- 
Dutch: the British Oil Empire 147 



CONTENTS 

XIV. How the United States lost Supremacy 

over Oil 151 

XV. The American Retort 178 

XVI. From Washington to Genoa: the Strug- 
gle for the Oil-fields of Russia 184 

PART IV. France's Part in the Struggle between 
Great Britain and the United States. 

Chap. XVII. The Cartel of Ten 201 

XVIII. The Petroleum Consortium 207 

XIX. How Great Britain Succeeded in Win- 
ning France over to Her Side in the 
Struggle with the United States 215 

XX. Great Britain and the Oil-fields of the 

French Colonial Empire 234 

XXI. The Standard and France 239 

XXII. Conclusion: the World in 1923 244 



PART I 
THE WORLD'S OIL 



CHAPTER I 
*'WHO HAS OIL HAS EMPIRE!" 

The question of oil has become one of the most 
vital in all countries. Its importance is such that 
even the most solid political alliances are subor- 
dinate to it. The Great Powers have all an "oil 
policy." The United States, where the most power- 
ful trust is an oil trust — the Standard Oil Company 
— the United States, which control 70 per cent, of 
the oil production of the world, have decided not to 
leave the question to private initiative alone, but to 
start a vigorous oil policy both at home and abroad. 
The American Senate recently decided to create the 
"United States Oil Corporation to develop new petro- 
leum fields," while Mr. Bedford, Chairman of the 
Board of Directors of the Standard Oil Company, 
asked the Government to lend its support to any 
Americans who were soliciting oil concessions 
throughout the world. This support, which even 
Wilson — hostile to trusts as he was — did not refuse, 
was granted very energetically by Mr. Harding: 
three European States have just had experience of it. 

Britain, with her usual foresight, understood long 



10 THE WORLD-STRUGGLE FOR OIL 

ago the importance of oil, and took the necessary- 
action. In the work of exploration alone she is at 
the present moment spending considerable sums, and 
she will soon have nearly all the remaining oil-fields 
of the world in her hands. 

France alone remains behind, hesitates, changes 
her mind, and allows herself to be despoiled, not 
only of the region of Mosul, one of the richest oil- 
fields of the world, which was formally promised to 
her by the Agreements of 1916, but also of the few 
modest oil deposits which she possesses in her colo- 
nies. For these are almost all exploited by British 
firms; and by the Agreement of San Remo the French 
Government has, in addition, promised to reserve a 
large share for "British co-operation" in new com- 
panies which may be established there. 

"Who has oil has Empire!" exclaimed Henry 
Bérenger, in a diplomatic note which he sent to 
Clemenceau on December 12, 1919, on the eve of the 
Franco-British conferences held in London to con- 
sider the future of Eastern Europe and Asia Minor. 
"Control of the ocean by heavy oils, control of the 
air by highly refined oils, and of the land by petrol 
and illuminating oils. Empire of the World through 
the financial power attaching to a substance more 
precious, more penetrating, more influential in the 
world than gold itself!" The nation which controls 
this precious fuel will see the wealth of the rest of 



**WHO HAS OIL HAS EMPIRE!*' 11 

the world flowing towards it. The ships of other 
nations will soon be unable to sail without recourse 
to its stores of oil. Should it create a powerful mer- 
chant fleet, it becomes at once mistress of ocean 
trade. Now, the nation which obtains the world's 
carrying trade takes toll from all those whose goods 
it carries, and so has abundant capital. New indus- 
tries arise round its ports, its banks become clearing 
houses for international payments. At one stroke 
the controlling centre of the world's credit is dis- 
placed. This is what happened already in the 
eighteenth century when, with the development of 
British shipping, it passed from Amsterdam to 
London. And British statesmen have had, at one 
time, a moment of anxiety lest it should move to 
New York! 

Thus began the terrible struggle between Britain 
and the United States for possession of the precious 
"rock-oil." 

"The country which dominates by means of oil," 
said Elliot Alves, head of the British Controlled 
Oilfields, a semi-official, semi-private organization, 
which the British Government has specially com- 
missioned to fight the Standard Oil Company, "will 
command at the same time the commerce of the 
world. Armies, navies, money, even entire popula- 
tions, will count as nothing against the lack of oil." 

The War proved it. 



12 THE WORLD-STRUGGLE FOR OIL 

Whence does oil derive this formidable power, 
before which the whole world bows down? From 
the fact that the fundamental basis upon which the 
industrial life of modern nations rests is fuel. Be- 
fore the War, Germany, Britain, and the United 
States owed the whole of their power and their 
wealth to coal. It would have been true to say 
that the British Empire rested upon a foundation of 
coal. 

It is essential to have control over fuel in time of 
peace for economic prosperity, and in time of war 
to supply the navy and maintain control of the 
seas. 

Now oil has considerable advantages over coal. 
Its extraction is remarkably easy compared with that 
of coal. What is the boring of a well and the in- 
stallation of some simple machinery on the surface 
compared with the expensive subterranean workings 
which are involved in the exploitation of a coal- 
mine? An oil-boring before the War cost a few hun- 
dred thousand francs, while the simplest workings 
for a colliery always necessitated an expenditure of 
several millions. The installations once made, oil 
flows by itself into the reservoirs, whence it is con- 
ducted by pipe-lines to the sea-ports and there 
pumped into the ships. It may be refined before 
exportation or only on arrival in the country where 



**WHO HAS OIL HAS EMPIRE!" 13 

it is to be consumed. The expenditure upon labour 
in these various operations is extremely small, es- 
pecially in undeveloped countries where native la- 
bour is employed. Thus, even at the present time, 
in the Dutch Indies the coolies are paid a florin a 
day. Now at the end of the War the employés of 
the Royal Dutch in the Dutch Indies numbered only 
1,000 Europeans and 2,906 natives and Chinese for 
a production of 1,706,675 tons. A native earned 
only 300 gold francs a year for 80 tons of oil ex- 
tracted, refined and transported to the coast. 

After the Bolshevik revolution wages at Grosny 
were still only seven roubles a day, which, consid- 
ering the depreciation of Russian money, represented 
very little. Generally the expenses of production in 
Russia did not exceed a few kopecks a pood (50 
kopecks for one of the best-known firms, that of 
Akverdoff"). 

Thus oil is bound to become in future more and 
more important as a fuel, because of its peculiarity 
in necessitating so insignificant a charge for labour 
— which protects it from the inconveniences result- 
ing from the social crises in the midst of which we 
live — and because its net cost is so small. For half 
a century it was used only for lighting purposes, and 
then it had to compete with gas and electricity. At 
one time there was talk of limiting production! 

Between 1900 and 1910 the invention of the inter- 



14 THE WORLD-STRUGGLE FOR OIL 

nal-combustion engine and the enormous develop- 
ment of motoring gave it new impetus. Fine oils 
only had been used up to then. Under pressure of 
the demand, it became customary to raise and refine 
poorer and poorer oils, giving from 60 to 75 per 
cent, of waste products. 

There remained the mazut ^ or fuel-oil, which re- 
quired very high temperatures for combustion and 
which was very dirty in use. 

Then the German, Diesel, invented the internal- 
combustion engine for heavy oil. The mazut, sub- 
jected to high pressure in a cylinder, produces an 
explosive mixture which, without sparking-plug or 
magneto, drives the pistons in the manner of a petrol 
engine. The installation is rather heavy, but no 
boiler is required, and it takes up much less space 
than a steam engine of the same power. A vessel 
fitted with a Diesel engine can sail for fifty-seven 
days without re-fuelling, while with a steam engine 
it could only sail for a fortnight. A ship fitted with 
a Diesel engine and having a speed of 20 knots could 
sail from France to Suez, India, Australia, New Zea- 
land, and return by Cape Horn without re-fuelling. 
But, better than any words, the following little table, 
made out for two boats of the same power, will 

i"The famous petroleum wells of Baku . . . yield crude naphtha, 
from which the petroleum or kerosene is distilled; while the heavier 
residue (mazut) is used as lubricating oil and for fuel." — Encyclo- 
paedia Britannica, 11th éd., vol. iii, p. 230.— Translator's Note, 



*'WHO HAS OIL HAS EMPIRE!" 15 

give an idea of the great advantages of the Diesel 
engine: — 



Diesel. 



Steam. 



H.P 

Weight of engine and acces- 
sories 

Space required 

Daily consumption 

Consumption for a voyage 
of 15 days 

Bunker space for a voyage 
of 15 days 

Total space required for 
ens;ine and fuel , 



21,000 

1,000 tons 
5,300 cu. m. 
100 tons 
(heavy oil) 

1,500 tons 

1,700 cu. m. 

7,000 cu. m. 



21,000 

3,400 tons 
10,000 cu. m. 
360 tons 
(coal) 

5,400 tons 

7,000 cu. m. 

17,000 cu. m. 



At first oil was used on fishing boats, then on 
small coasters. To-day the biggest British cargo 
boats, of the type of the Zeelandia or Sutlandia, are 
fitted with Diesel engines. All German submarines 
had them during the War. In 1917 Herr Ballin/ 
the great friend of William II and the head of the 
Hamburg- Amer ika line, just before his suicide de- 
cided on the construction of a fleet of enormous ships 
fitted with internal-combustion engines. Scandina- 

i"Herr Ballin committed suicide, foreseeing that unrestricted sub- 
marine warfare, which had then been decided upon, would be the 
downfall of Germany." — Revue des Deux Mondes: Contre-Amiral 
Degouy, "Oil and the Navy." 



16 THE WORLD-STRUGGLE FOR OIL 

via, Holland, Italy, all now use the Diesel engine. 
France alone remains behind in this respect. It has 
even been used on railways, a little-known fact. 
Diesel locomotives with four cylinders, built by 
Sulzer Brothers of Winterthur, have recently been 
run on the line from Berlin to Mannsfeld. 

"The development of our metallurgy," wrote Ad- 
miral Degouy in April 1920, "will soon give us the 
assurance that we also shall be able to manufacture 
large-bore cylinders and pistons of flawless casting, 
like those made in Augsburg, Nuremberg, Stock- 
holm, and Christiania, which will support for long 
periods without change (and consequently without 
leakage) the temperature of 1,000° C. which is de- 
veloped by the combustion of mazut in these 
engines." 

Since the invention of the internal-combustion en- 
gine, mazut has been introduced directly into the 
furnaces of great ships. The heating power of this 
formerly despised product is almost double that of 
coal: 1 kilogramme of liquid fuel produces the 
same results as 1.7 kilogrammes of coal. Its use 
allows of the reduction by five-eighths in bunker 
space, and by 70 to 80 per cent, of the stokers, since 
a single man can look after several boilers. The 
fuelling of a ship is effected cleanly and quietly in 
a few hours. Hundreds of tons of oil can be 
pumped into the cisterns in a negligible time, and 



\ 



**WHO HAS OIL HAS EMPIRE!** 17 

that even out at sea and in heavy weather. To give 
an idea of the difference in time and labour re- 
quired for the loading of coal and oil before the 
sailing of a mail steamer of the tonnage of the 
Olympic or the Lusitania, I will quote the following 
figures: — 

Coal 5 days 500 men 

Oil 12 hours 12 men 

The labour of stoking and clearing the furnaces 
is done away with; there is no longer either dust or 
smoke. Parts of the ship which are too restricted 
or too inconveniently placed for housing coal can 
be used for oil. It is stored in the double bottom 
of the boat, and by utilizing the coal bunkers for 
general cargo the available storage space is increased 
by 10 per cent. On the latest Cunard and White 
Star liners the economy of space thus realized has 
been as much as 33 per cent. And Admiral Lord 
Fisher drew attention to the fact that on the Maure^ 
tarda — ^the sister ship to the Lusitania — the adop- 
tion of oil fuel allowed of the reduction of the crew 
by three hundred men. 

The efficiency of a boiler heated by coal is not 
much more than 60 per cent.; that of one heated by 
oil reaches 80 per cent. On Japanese steamers 
of the type of the Temyo Maru, of 21,000 tons, with 
Parsons turbines of 20,000 horse-power, the con- 



18 THE WORLD-STRUGGLE fOR OIL 
sumption of oil is only 455 grammes to one effective 
horse-power, instead of 685 grammes of coal. The 
flexibility and ease of control are extraordinary. 

Since 1911 the merchant fleet of the United States 
has been consuming 15 million barrels annually. 
Nearly all the nations have followed this example/ 
especially those which dream of the dominion of 
the seas for the use of oil in their warships gives 
them an incontestable superiority. The presence of 
a squadron sailing under coal is disclosed at a dis- 
tance of more than 10 kilometres by enormous clouds 
of smoke; under oil its presence is almost imper- 
ceptible; it becomes visible only at the moment when 
it is about to attack. Ease of approach is enor- 
mously increased; and even if an enemy vessel is 
discovered by marine or aerial scouts it is very diffi- 
cult for the gunners of the threatened vessel to take 
their aim at so vague a target as an almost invisible 
horizontal silhouette. "No smoke, not even a fun- 
nel!" exclaimed Lord Fisher in his strenuous cam- 
paign for the transformation of the British Navy. 
Many years elapsed, however, before he saw the 
triumph of the new fuel. 

It has been objected that ships lose a little of the 
protection which is conferred upon them by their 
belts of coal bunkers; but this criticism is valueless. 

1 Since 1920 the world tonnage of oil-burning steamers has ex- 
ceeded that of steamers built to burn coal. 



"who has oil has empire!*' 19 
For, as they gain considerably in lightness, it is 
possible to increase the thickness of the armour plate 
and the size of the guns. The abolition of funnels 
permits of a considerable increase in the field of 
fire of the artillery. 

Moreover, with oil fuel fleets acquire an extreme 
mobility.^ Half an hour after receiving the order 
to raise steam the ship is ready to start. Thirty-five 
minutes afterwards it is going at full speed. In six 
minutes it can pass from normal to maximum speed. 
Eleven minutes are needed to get a boiler under full 
pressure. A voyage at forced speed entails no extra 
fatigue for the crew: with coal it is hell! 

Thus, since 1912, oil has been constantly used on 
twenty-eight German battleships, almost the whole 
of the fleets of Great Britain and the United States, 
and the Russian squadrons in the Baltic and the 
Black Sea. The American Navy has completely 
abandoned coal for its new units. 

And France? France, which was the first to con- 
ceive the idea, had, at the moment when war 
broke out, only a few small boats burning oil, and 
not a single powerful modern vessel comparable with 
the Queen Elizabeth, And yet, as early as 1864, it 
was France that built the first ship, the Puebla, sail- 
ing under Lieutenant Farcy, to use the new fuel, 

1 At the battle of Jutland, only the oil-burning ships realized their 
trial speed. 



20 THE WORLD-STRUGGLE FOR OIL 

which aroused so much curiosity during the Second 
Empire. But the selfish opposition of our coal- 
owners overcame those who were favourably in- 
clined, including Napoleon III himself. 

No one gives a thought to these facts at the present 
time. France often points the way of progress; she 
never profits by it. 

The most far-reaching revolutions have begun with 
a technical invention. The unknown monk who first 
mixed charcoal with sulphur and saltpetre razed 
feudal castles and created the great modem States. 
And he who balanced a magnetized needle on its 
pivot was the real founder of colonial empires. 

We are just entering upon an economic period 
which will turn the whole world upside-down — the 
Revolution in Fuel, with its far-reaching conse- 
quences. 



CHAPTER II 

OIL: ITS ORIGIN, DISCOVERY, 
AND HISTORY 

The Great Producing States before 1914 
AND IN 1921 

Oil is found naturally in different forms. Some- 
times it occurs as a volatile liquid at ordinary tem- 
peratures; it is then known as naphtha. Sometimes 
the volatile principles are only given off at higher 
temperatures; it is then called petroleum or rock- 
oil. Sometimes also it appears in a semi-solid form, 
asphalt, its volatile properties having already 
evaporated. 

It is very rarely that oil is found on the surface 
or gushing up by itself without the help of pumps. 
It is usually met with at a great depth underground, 
in pockets in which oil and gas are found above 
water. Thus, in order to detect its presence, it is 
necessary to make borings. When one reaches a 
pocket in the neighbourhood of the gas, the latter 
escapes by the outlet which is offered. If the boring 
first reaches oil, and if the pressure of gas is suf- 
ficient, the oil gushes out and forms a spring. This 

21 



22 THE WORLD-STRUGGLE FOR OIL 
is what happened in the Caucasus, where certain 
wells spouted up to a height of eighty metres through 
the borings made by the prospectors. More often 
the gas pressure is not sufficient to raise the liquid 
to the surface, and it is necessary to install pumps 
driven by steam to empty the pocket. At the time 
of the boring, when the cylindrical metal drill, 
driven vertically by a metal cable and held vertical 
by the derrick (a sort of pyramidal framework 
of metal), reaches the deposit, the gas which has 
been accumulating for thousands of years escapes, 
driving, pushing, sucking up the oil, and making a 
fountain, a gusher, a sort of artesian well. The oil 
is led away in metal pipes, vertical till they reach the 
surface, horizontal to the refineries, ports, or other 
destinations. Once the well is capped, it is not 
touched again; it is alone in the desert, and only a 
metre records its daily output, while hundreds of 
thousands of men are obliged to work underground 
to wrest coal from the bowels of the earth by the 
strength of their arms! 

The depth of the wells varies from 200 to 1,600 
metres, according to the region. The duration of 
the flow is essentially variable, depending upon the 
magnitude of the deposit of oil. But it goes without 
saying that when a spring has flowed for seven years 
more or less, like the first one exploited by the 
Mexican Eagle, it gives out, yielding salt water. 



ORIGIN, DISCOVERY, HISTORY 23 

The fact is quite ordinary, and is known in all com- 
petent circles, although it is sometimes brandished 
as a warning by interested people in order to lower 
the value of certain oil shares. One often hears of 
"pools," "rivers," or "veritable lakes of oil." These 
expressions are most inaccurate. Apart from cer- 
tain exceptions, such as the famous well of the 
Colombia in Rumania in 1913, the deposits of oil 
are neither rivers nor pools. They are actually solid 
layers of sandstone, often very hard, impregnated, 
saturated with oil. This sandstone is very porous 
and contains thousands of cavities or pockets en- 
closing the precious "rock-oil." Its thickness varies 
from the usual 30 or 50 metres (giving wells of a 
yield of 200, 500, or 1,000 barrels a day) to one 
kilometre in certain wells of the Eagle (yielding 
70,000 to 100,000 barrels a day, instead of 200 to 
1,000). The Eagle is lucky, it must be admitted, 
and its history is unique in the annals of oil. Only 
its sister company, the Mexican Oil, which works in 
the same field, but for the Standard Oil group, can 
be compared with it. 

Even a superficial examination of the chemical 
composition of oil, a hydrocarbon, in which the car- 
bon, in a proportion of 80 to 88 per cent., is com- 
bined with hydrogen, and sometimes with a little 
oxygen, reveals in this compound a marvellous 
source of thermal energy, which may manifest itself 



24 THE WORLD-STRUGGLE FOR OIL 

in various ways. For, from the greenish-brown oil 
which is lighter than water, no less than 128 chem- 
ical compounds are obtained, which are used in forty 
different industries. From the retort in which the 
crude oil is distilled comes an infinity of substances 

of basic importance in modern industry. 

• •••••• 

Although the intensive use of oil and its industrial 
applications are of comparatively recent date, the 
discovery of deposits of petroleum goes back to re- 
mote antiquity. 

The history of oil is as old as the world, since 
there is already mention of it in the Book of Gene- 
sis. The wells of Baku were known long before 
the Qiristian era. In the peninsula of Apsheron, 
where they are situated, arose the cult of Zoroaster 
and the fire-worshippers. According to the latter, 
the flames which escaped from the soil would bum 
until the end of the world. They were, at any rate, 
famed throughout the world nearly three thousand 
years ago. 

The Greeks and Romans were acquainted with oil. 
The latter called it bitumen. In Low Latin it was 
petroleus, from petra — ^stone, and oleum — oil; and 
the word has come down to us through the scholars 
of the seventeenth and eighteenth centuries who 
adopted it. 

In ancient mythology and literature oil is often 



ORIGIN, DISCOVERY, HISTORY 25 

mentioned. It is probably with oil that the Centaur 
— ^to avenge himself upon Hercules — ^was obliged 
to anoint the famous shirt of Nessus! "It is not 
without reason," says Plutarch, *'that certain authors, 
wishing to restore truth to legend, assert that petro- 
leum is the substance which Medea used to smear 
the crown and veil that play so great a part in the 
tragedies; for fire does not issue from them of itself, 
but when they are brought near a flame fire is com- 
municated to them by some kind of attraction with 
such rapidity that the eye can scarcely follow it.'* 
Herodotus, in his works, mentions the oil-fields of 
Zante; Pliny those of Agrigente in Sicily; Plutarch 
those of Ecbatana and Babylon. "The land of 
Babylon," he says, "is impregnated with fire. . . . 
It is as though the soil, agitated by the fiery sub- 
stances which lie concealed in its bosom, has a sort 
of pulse which makes it quake." When Alexander 
conquered these regions he was particularly aston- 
ished, in the province of Ecbatana, at "a gulf from 
which rivers of flame streamed continually, as though 
from an inexhaustible source." ^ His return to 
Babylon was celebrated by the burning of two paral- 
lel streams flowing through the streets. And one of 
his courtiers, to amuse him, caused a young man to 
be anointed with oil ; scarcely had it touched his body 
when he was enveloped in flames. 

1 Plutarch's Lives^ Alexander the Great, chap. xliv. 



^ Mil 



26 THE WORLD-STRUGGLE FOR OIL 

The Chinese have used oil for lighting from the 
most distant times; Europeans since the fourteenth 
century. It is difficult to go further back owing to the 
absence of documents during the Middle Ages. But 
what was Greek Fire, if not oil? In the fifteenth cen- 
tury we find traces of its use in medicine ; and even at 
the present time the natives of Mosul and Bagdad 
use some of the purer varieties, which they call 
"moum," as a dressing for serious wounds. Oil has 
some fame as a vermifuge; as, for example, the oil 
of Gabiau in the south of France. A curious mem- 
oir of François Glouet, who was entrusted with the 
task of embalming Francis I in 1547, mentions the 
use of an oil ("pétroUe") in the colouring of a 
waxen mask made in the dead king's likeness. 

In the eighteenth century Apsheron was again the 
astonishment of British travellers seeking a route to 
India. "The Russians drink it as a tonic and as a 
beverage," writes Jonas Hanway, who visited these 
regions in 1754, speaking of petroleum. "It never 
intoxicates. Used internally, it is also an excellent 
cure for gravel. Used externally, it is a valuable 
remedy in cases of scurvy, gout, and cramp. It is 
very good for removing stains from fabrics, and 
would be in more frequent use if it did not leave be- 
hind it an abominable smeU." 

Finally, the earliest settlers found oil in America, 
or, to be more exact, recognized the wells which had 



/ •/ % 

/ /world>\ ** 
/ProducMon \ 
/of Oil in1918M 
l5l'f.729,353barrel5i 

\ A. 81,8^1.967 X 


WCanada :a06% 


\^ ^ / •- \^ v' \A \1 


>^ ' liSermanv tO.l'fy. 


|lAroenHne:0^6% 


lEqyph :aM)% 


Tpînidad :aM)% 


Jaoan rû^tS^ 


Peru :0A9% 


6alicia :l.09% 


Persia :I.M)56 


1 



World ProducNon in 1918. 



28 THE WORLD- STRUGGLE FOR OIL 
already been dug by the Indians. But it was only in 
the middle of the nineteenth century that the real im- 
portance of the oil-fields scattered over the globe be- 
gan to be realized. 

While France about 1840 made the first trial use 
of shale oil, and Germany in 1853 invented the oil 
lamp, later perfected by Laydaw of Edinburgh, "the 
bold and inventive spirit of Young America unde- 
terred by a series of fruitless experiments, set itself 
to discover the first springs of the precious liquid in 
Pennsylvania." In 1858 Colonel Edward Drake, 
while boring a salt-water well near Tytusville, was 
nearly engulfed with his workmen in a jet of oily 
liquid, the spring of which was apparently inexhaust- 
ible, and continued to furnish several thousand litres 
a day. It was subsequently discovered that this 
liquid after a very simple process of purification, 
would burn with a brilliant light. The "oil fever" 
then seized all America and myriads of searchers 
rushed into the valleys of the AUeghanies in Penn- 
sylvania. 

The oil industry was created. For a long time 
America was the only country producing the precious 
oil; forty years ago she still furnished two-thirds 
of the world's supplies. But although the oil-fields 
of the AUeghanies and of Ohio were developed rap- 
idly, they have been far surpassed by the enormous 
deposits of Baku. In 1898 Russia outdistanced the 



ORIGIN, DISCOVERY, HISTORY 29 

United States, and kept the first place until 1902, 
when America recovered it after a great struggle, 
thanks to the new oil basins of Texas, California, 
and the Mid-Continent, and above all those of Kan- 
sas and Oklahoma, with its famous "Glen Pool," 
which in 1908 produced the fantastic figure of 50,- 
000 barrels a day, 

Russia has never been able to retrieve her posi- 
tion. Her production, which in 1901 was 50 per 
cent, of that of the whole world, was not more than 20 
per cent, two years before the War, and in 1918 had 
fallen to 7.86 per cent. The cause is chiefly the 
diminution of production of the "black region" of 
Baku, in the peninsula of Apsheron, which juts out 
into the Caspian Sea and is connected with the open 
seas by a railway and by a pipe 800 kilometres long, 
through which the annual flow of oil towards Europe 
before the great world catastrophe amounted to 
400,000 tons. In five years the average yield of 
the weUs diminished by 40 per cent., while the mean 
depth of the borings was increased by 25 per cent. 
It was necessary to dig more and more deeply to find 
less and less oil. The old oil-fields of Baku were 
nearing exhaustion. Now they alone furnished four- 
fifths of the production of Russia. That is why, in 
1918, Russia lost the second place, which she had 
held so long, to her young rival Mexico. It is true 
that the two revolutions which she had to undergo in 



30 THE WORLD-STRUGGLE FOR OIL 

this quarter century helped the process considerably. 
The revolution of 1905 caused the bloody disturb- 
ances of the Caucasus: the finest factories were burnt 
and numerous wells destroyed. Great unrest con- 
tinued incessantly in this region until the triumph of 
Lenin. But there are still in Russia oil-fields of very 
considerable extent, scarcely touched before 1914, 
which the world cannot afford to dispense with.^ 

The United States, Russia, Mexico, Rumania, these 
were, in order of importance, the four chief oil-pro- 
ducing countries before the War. Rumania shares 
with America the distinction of being the first coun- 
try in which rock-oil was extracted. The same year 
in which Colonel Drake made his experiments at 
Tytusville 250 tons were extracted from a well by 
hand-pumping: the oil was only just below the sur- 
face. Since then Rumanian production has contin- 
ually increased. It was 500,000 tons when the re- 
gion of Moreni, one of the richest in the world, was 
discovered. Foreign capital flowed in immediately, 
and Rumanian production reached its highest point 
in 1913 with 2 million tons. The War gave it an 
appreciable setback; at the present time it does not 
come to more than half this figure.^ 

1 Cp. chap, xvi, The Struggle for the Oil-fields of Russia. 

2 Having fallen to 920,000 tons in 1919, it had increased to 1,030,- 
086 tons in 1920 (12 per cent, increase). This slight recovery is the 
first noted; for six years Rumanian production steadily decreased. 
The worst year was 1917. 



100.000 
l-ons 



Pre-war producHon of oil in Mexico, 
Rumania, rhe Du^ch Indies and Galicia. 



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32 THE WORLD-STRUGGLE FOR OIL 

Although the production of Rumania, hampered 
by the lack of electricity which hinders the borings, 
has recovered with difficulty, that of Mexico, often a 
prey to civil war, has known no pause in its incred- 
ible progress. In ten years it has passed from 3 
to 160 million barrels, carrying its share in world 
production from 1 per cent, to 23 per cent. The 
figures are worth quoting: — 



Yfiar 


World Production 


Percentage from 


X ear. 


1910-21 (barrels). 


Mexico only. 


1910 


328,000,000 


1.10 


1911 


344,000,000 


3.65 


1912 


352,500,000 


4.70 


1913 


385,000,000 


6.80 


1914 


400,000,000 


5.30 


1915 


426,500,000 


7.70 


1916 


459,500,000 


8.70 


1917 


505,500,000 


10.09 


1918 


515,000,000 


12.40 


1919 


551,000,000 


15.85 


1920 


684,000,000 


23.35 


1921 


759,000.000 


25.00 



It is Mexico which saves the world to-day, for the 
United States — the greatest producers in the world — 
do not even supply enough for their own consump- 
tion, and are obliged to call in the help of Mexico to 
make good their deficit. In spite of all their efforts, 
they have only succeeded, during the last three years, 
in increasing production by 24 per cent., while Mex- 



ORIGIN, DISCOVERY, HISTORY 33 
ico has augmented hers by 130 per cent. The other 
countries follow at a considerable distance. Here 
is the record of each for 1921: — 



Barrels. 

United States . 469,639,000 

Mexico 195,064,000 

Russia 28,500,000 

Dutch East 

Indies 18,000,000 

Persia 14,600,000 

Rumania 8,347,000 

India 6,864,000 

Poland (Galicia) 3,665,000 

Peru 3,568,000 

Japan and For- 
mosa 2,600,000 



Barrels. 

Trinidad 2,354,000 

Argentina 1,747,000 

Egypt 1,181,000 

Venezuela 1,078,000 

France 392,000 

Germany 200,000 

Canada 190,000 

Italy 35,000 

Algeria 3,000 

Great Britain . 3,000 

Other countries 1,000,000 



The total production was 759,000,000 barrels of 
42 gallons, against 684,000,000 barrels in 1920. It 
exceeds 100 million tons, easily beating the records 
of the preceding years. If we remember that half 
a century ago, it was only 66,000 tons, and that be- 
tween 1913 and 1920 it has almost doubled, we shall 
see what a tremendous stimulus the great world War 
has been. 

But fears are increasingly felt. Will it be pos- 
sible to satisfy the dizzy increase in the consumption 
of oil? And do not certain countries already fear 
to see the reserves contained in their soil exhausted? 



CHAPTER III 

AMAZING INCREASE IN 
CONSUMPTION 

Fears of the United States 

The consumption of oil is rising at a terrific rate. 
Entire branches of industry are transformed, and it 
may be said that all modern transport is increasingly 
dependent upon the use of the new fuel. Automo- 
bilism and aviation owe their existence to it. Not 
only do steam engines tend to give place to the oil 
motor in a great number of cases, but they themselves 
begin to use oil instead of coal. Locomotives and the 
engines of ships more and more seek the source of 
their energy in oil. No more smoke, no more trou- 
blesome ash, and double the calorific power. The 
work of a fireman, formerly so exhausting, is reduced 
to the opening and closing of a tap. If coal is re- 
placed by mazut in the furnaces of ships, their radius 
of action is increased by 50 per cent.; it is more 
than tripled if the internal-combustion engine is used. 
Certain British engineers are not afraid to assert 
that one ton of mazut, used in a Diesel engine for 

ships, is equivalent to at least six tons of coal. 

34 



INCREASE IN CONSUMPTION 35 

Few countries hesitate in face of such advantages. 
Since 1885 the railways of Southern Russia have 
been run on oil; those of Rumania since 1887. The 
railway companies of the United States consumed 
20 million barrels even in 1909 — that is, one-tenth 
of the production at that time. And the last few 
years have been marked by the conclusion of con- 
tracts by the United States Railroad Administration 
for the delivery of 50 million barrels. The engines 
of the Southern Pacific Railway have been aptly de- 
scribed as veritable monsters. Their boilers are two 
metres in diameter and fourteen and a half metres 
long. Their heating-surface is double that of or- 
dinary locomotives. The driver's place is in front, 
which allows him to see the track. 

Mexico has long since followed the example set by 
the United States. So also has Austria for her Al- 
pine railways. France has made experiments which 
have been much talked of; and the Argentine, only 
a few months ago, has concluded important contracts 
with the Shell Transport and Trading Company for 
the supply of oil for her railways. Everywhere 
the substitution of oil for coal is going on, and con- 
sumption is developing with such rapidity that the 
supply is no longer anything like equal to the de- 
mand. Even if Russia recovered, the discrepancy 
between the needs of the world and the quantity 
available would be considerablct That is why the 



36 THE WORLD-STRUGGLE FOR OIL 
price of liquid fuel, which requires little labour in 
its production, remains so high. 

Since North America supplies 80 per cent, of the 
world production, the dollar has become the stand- 
ard currency for oil. At the present time, Ruma- 
nian oil, delivered in Hungary, is sold at the same 
price as American oil. The market-price is there- 
fore fixed for the whole world by New York. 

Very few people realize at all clearly what will be 
the consumption of oil in a few years' time. It is 
natural enough, for it is only a short time since our 
great and instructive Press began — very timidly, 
however — to entertain its readers with this burn- 
ing topic. There is no one, at present, who does not 
know that the question of fuel is of supreme impor- 
tance to the whole industrial life of Europe. 

Now, the world-production of coal was, in 1920, 
about 100 million tons short, compared with the pro- 
duction in 1913. The directors of colliery com- 
panies endeavour to increase the output of the mines, 
but they obtain in general only disappointing results, 
which is not strange when we observe the increasing 
number of miners' strikes, the rise in wages, and the 
fact that laws are continually passed to reduce the 
hours of labour. 

In producing steam, one ton of mazut gives almost 
the same result as two tons of coal ; more than 50 mil- 



INCREASE IN CONSUMPTION 37 

lion tons of fuel-oil are therefore required to make 
good this enormous deficit. 

Now, in 1919 the world production of mazut did 
not exceed 75 million tons. After making good the 
shortage of coal, this would leave only 25 million 
tons to satisfy the ordinary demand. This compari- 
son of figures makes clear how great is the need of 
oil, at a time when the use of oil, in preference to 
coal, is becoming more and more the order of the 
day. Now, the great and general increase in con- 
sumption is not equalled by the production which, 
though far from stationary, is none the less much be- 
low the needs which are predicted for the future in 
competent circles. An American oil journal re> 
cently published the following figures for the con- 
sumption of the United States: — 

1907 24 million tons 

1918 57 million tons 

1919 75 million tons 

And even at the beginning of 1920 an increase of 25 
per cent, over 1919 was noted. The rate of increase 
was such that, in January and February 1921, the 
American consumption was greater by 230,729 bar- 
rels a day than the national production. The stock 
of oil in the United States, both national and Mex- 
ican, has recently been considerably reduced, and 



38 THE WORLD-STRUGGLE FOR OIL 
does not amount to more than 114,000,000 barrels, 
representing only four months' consumption, al- 
though for years past it has always been sufficient to 
meet the consumption for six months. It must be re- 
marked that motor-cars are terrible gluttons for pet- 
rol, and that in the United States every farmer has 
his car. In a self-respecting family there are gen- 
erally three — a limousine for use in town, an open 
car for touring, and a Ford for the servants to fetch 
provisions. It has been calculated that there is on 
an average one motor-car to every thirteen inhabit- 
ants. The Ford works alone are capable of turn- 
ing out three million annually. 

And, as if that was not enough, America is plan- 
ning to develop, by motor traction, the means of 
transport in Asia, the continent without railways. 
We may predict for this a consumption of 120 mil- 
lion tons in the near future. 

The United States consume twice as much oil as the 
rest of the world, while their resources do not amount 
to more than one-seventh of those of the world. 

Their consumption increased in 1920 by 25 per 
cent.; their production only by 11 per cent. And 
already fears are entertained that it may diminish. 
Two-thirds of the oil-fields of Oklahoma, which state 
alone produces nearly one-quarter of the total, have 
been developed; and the number of borings tends to 
diminish. 



INCREASE IN CONSUMPTION 39 

If the increase in world-consumption of oil con- 
tinues at the rate that it has done during the past few 
years, the oil reserves of the United States, calculated 
on the basis of 70 barrels to each inhabitant, with- 
out allowing for increase of population, would, ac- 
cording to the Smithsonian Institute, come to an end 
about the year 1927. 

These figures seem to me a little exaggerated, for 
the reserves contained in the soil of the United States 
cannot possibly be completely exploited in so short 
a time. But the figures published by the Geologi- 
cal Survey of the Department of the Interior shows 
that other countries consume half as much oil as the 
United States, while their soil contains seven times 
more. 

"These countries consume at the present time two 
million barrels a year; at this rate, they have reserves 
sufficient for 250 years. The United States consume 
400 million barrels a year; they have only enough 
for 18 years.^ 

"The total amount of oil which can still be ex- 
tracted from the soil of the entire world has been 
computed at 60,000 million barrels — 43,000 mil- 
lion have already been brought to the surface by suc- 
cessful borings. 

"Of the 60,000 million which remain to be ex- 

1 Cp. Part III, chap, xiv, How the United States Lost Supremacy 
over OU, 



40 THE WORLD-STRUGGLE FOR OIL 
traded, 7,000 million are to be found in the United 
States and in Alaska; 53,000 million in the rest of 
the world." 

That is why the American Navy, having in view 
the treatment of bituminous shale by distillation, has 
reserved to itself the rights over immense deposits, 
chiefly in Colorado and Utah. If the United States 
do not succeed in acquiring new oil-fields in the rest 
of the world, the position will become so serious that 
they will only be able to avoid war at the price of 
economic vassalage. 

There is oil in all parts of the world, and yet do- 
minion over oil is one of the most concentrated pos- 
sible. 

From Alaska almost to Tierra del Fuego, every 
country in the New World possesses some. 

Alaska. 

Canada: its presence was discovered in 1789 by Sir Alex- 
ander Mackenzie. 

United States. 

Mexico. 

Central America. 

Venezuela. 

Trinidad, Guiana. 

Colombia. 

Ecuador, Peru, Bolivia. 

Chili, the Argentine. 

Brazil and Uruguay: it is hoped that oil will be found 
shortly. 




c 
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42 THE WORLD-STRUGGLE FOR OIL 

In Europe it is less evenly distributed: 

Hanover (Wenigsen). 
Alsace. 
Italy. 

Poland. The Ukraine. Rumania. 

Hungary : a subsidiary company of the Anglo-Persian, the 
UArcy Exploration, found oil deposits in March 1921. 

Asia is nearly as rich as America: 

The Caucasus. 

Persia, Mesopotamia. 

Dutch Indies. 

Siam, Burma. 

China. 

Japan and Formosa. 

Africa and Oceania, on the contrary, seem to pos- 
sess only small quantities of the precious oil. There 
is some in North Africa, in Egypt, and possibly in 
Madagascar. The great British prospecting group, 
which I have already mentioned in connection with 
Hungary, is making a thorough search at this mo- 
ment in Western Australia and New Zealand. 

Now nearly all these oil-fields, scattered in the four 
comers of the world, and in so many different coun- 
tries, are at the present moment in the hands of two 
great trusts — one American, the Standard Oil, and 
the other Anglo-Dutch, the Royal Dutch-Shell — and 
certain companies controlled by the British Govern- 
ment, 



PART II 



THE STRUGGLE OF THE 
TRUSTS 



I CHAPTER IV 

THE STANDARD OIL COMPANY 

Although it sometimes happens that governments 
oppose each other openly in the struggle for oil, as 
in the case of Poland, Rumania, the Caucasus, and 
Turkey, they prefer, in general, to hide behind trusts. 

There exist in the United States numerous oil con- 
cerns whose power is far from negligible, such as 
the Sinclair Oil Company, with a capital of 500 mil- 
lion dollars, and the Texas and the Doheny interests, 
which together represent another 500 million dollars. 
But all these independent producers must bow before 
the unchallenged supremacy of the Standard Oil. 

The Standard Oil, a purely American concern, 
preceded the Royal Dutch — a Dutch company 
with considerable British, and recently a little 
French, capital ^ — by twenty years. 

As a matter of fact, there is no longer to-day one 
Standard Oil, but forty companies, all bearing this 
I name followed by that of a town or State: 

^ Forty per cent, of the capital of the Royal Dutch is in French 
hands, but France unfortunately has no voice in the direction of this 
undertaking. 

49 



46 THE WORLD-STRUGGLE FOR OIL 

The Standard Oil of New Jersey, 
The Standard Oil of Pennsylvania^ 
The Standard Oil of Kansas, 
The Standard Oil of Ohio. 

The first is the most important. All are federated 
tinder one great administrative body. 

The Chairman of the Board of Directors of Stand- 
ard Oil Companies is at the present time Mr. Bedford, 
formerly Chairman of the Standard Oil of New Jer- 
sey, where his place has been taken by Walter Teagle, 
This great Council is the real brain of the Standard, 
from which emanates the general policy of this feder- 
ation of companies, as powerful as the Government 
of the United States — more powerful sometimes. 

Its history, like that of all American trusts, has 
something of the marvellous. At the beginning of a 
great undertaking there is always a great man: the 
founder of the Standard was John Rockefeller, a 
small dealer in oil, who, in 1865, conceived the idea 
of forming a federation of all American oil-dealers. 

There were in 1870, in the United States, 250 re- 
fineries, which waged among themselves a merciless 
price-war. 

It was to put an end to this struggle, which was so 
advantageous to the consumer, that the Standard Oil 
Company was created, a combine of refiners, not of 
producers. Following a strict and constant princi- 



THE STANDARD OIL COMPANY 47 
pie, which it has always observed, the Standard has 
refrained from seeking raw oil, leaving this task en- 
tirely to the prospectors and producers. But as soon 
as it reaches the surface, the oil, wherever it is found, 
becomes the exclusive property of the Company, to 
whose innumerable refineries it is conducted by pipe- 
lines. The original Standard Oil Company, that of 
Ohio, began humbly with a capital of a million dol- 
lars, and the small consumption of 600 barrels a day. 
Established in Cleveland, it grouped together all the 
interests in the refining and transport of oil acquired 
in Pennsylvania since 1865 by Rockefeller, Andrews, 
Harckess and Flager. Two years later, not only had 
it brought all the refineries in the neighbourhood of 
Cleveland under its own control, but it had built oth- 
ers at Baltimore, Philadelphia, New York, Boston, 
and Pittsburgh. 

Six years after its inauguration, it already ac- 
quired the greater part of the crude oil produced in 
the United States. Moreover, its capital had been 
twice increased, in 1872 and 1874. 

At the end of ten years, it transported and distrib- 
uted 95 per cent, of the American output. 

In 1881 it amalgamated thirty-nine oil companies. 
The trust was constituted and already disposed of a 
capital of 75 million dollars. The first cycle of its 
growth was finished. Supreme in the United States 
market and sure of its monopoly, it completed the 



48 THE WORLD-STRUGGLE FOR OIL 
laying of its first pipe-line to the Atlantic. The 
Standard Oil was about to lay claim to Europe. 

The Agreement of January 2, 1882 

Such fortunes were not built up by entirely hon- 
ourable methods. The directors of the Standard Oil 
of Ohio had formed pools. They imposed buying 
and selling prices on every company which partici- 
pated. This system, which in a dozen years gave such 
wonderful results, was not without its faults. There 
was friction between members of the pool. The need 
for establishing unity of direction was soon felt. It 
was with this object that the Standard Oil Trust was 
founded in 1882. 

It was the first time that the word "Trust" appeared 
in the name of a firm. A Committee of nine mem- 
bers, or trustees, was formed. It comprised all the 
Rockefeller family: John Rockefeller, Payne, Wil- 
liam Rockefeller, Bestwick, Flager, Warden, Pratt, 
Brewster, Archbold. The nine trustees became the 
sole delegates and depositories of all the 39 compa- 
nies conjointly engaged. They received from each 
concern the shares and the corresponding voting pow- 
ers. Trust Certificates, of a nominal value of 100 
dollars, were exchanged for shares only in the pro- 
portion of the value of each undertaking to the total 
value of all the undertakings constituting the Trust. 



THE STANDARD OIL COMPANY 49 

The Agreement of 1882 which sealed the pact, pro- 
vided for the admission into the Trust of new compa- 
nies and the eventual formation of a Standard Oil 
Company in each State of the Union. 

Companies of four kinds entered the combine of 
1882:— 

1. Fourteen companies in which the whole of the 
shares were held by the trustees. Among these were 
the Atlantic Refining Company, the Standard of 
Ohio, and the Standard of Pittsburgh, The first of 
these companies succeeded in recovering its liberty 
in 1911. 

2. Rich private individuals, having an interest in 
the oil industry and holders of large parcels of 
shares, such as W. C. Andrews and John Archbold. 

3. Twenty-four companies in which the majority 
of the shares were held by the trustees: — 

Central Refining Company of Pittsburgh, 

Germania Mining, 

Empire Refining, 

Keystone Refining, 

National Transit Company, etc. 

These twenty-four companies placed themselves 
under the control of the Trust from 1882 onward. 
Two others have come in under compulsion: — 



50 THE WORLD-STRUGGLE FOR OIL 

(1) The Tide-water Pipe-line Company, hav- 
ing constructed pipe-lines itself, entered into fierce 
competition with the Standard, On October 9, 
1883, it was compelled to negotiate with the 
National Company, Under the resulting con- 
tract, it agreed to provide 11 H per cent, of the 
quantity sent to the ports by pipe-lines as its share 
of the traffic, and was guaranteed an annual profit 
of at least half a million dollars for fifteen 
years. 

(2) The Producers* Associated Oil Company, 
born of a concerted effort of independent pro- 
ducers to fight the Standard, gave in in October, 
1887. 

4. One other company alone forms the fourth 
class. The Trust has an interest in this but has never 
been able, whatever its efforts, to obtain the majority 
of the shares and to control the company. This is 
the United States Pipe-Line Company, This com- 
pany experienced many difficulties and mortifica- 
tions. After having struggled against the inertia of 
the railways devoted to the Standard Oil, and spent 
more than 15,000 dollars on law costs alone, it suc- 
ceeded in pushing its lines up to Washington, but 
could never get any further, nor reach the coast; the 
Standard bought up the intervening territory. 

At its zenith, in 1911, when it was declared illegal 



THE STANDARD OIL COMPANY 51 

by the Supreme Court of the United States, the Stand- 
ard owned 90 per cent, of the pipe-lines and con- 
trolled S6V2 per cent, of the oil production of Amer- 
ica. A single company, the Pure Oil Company, 
founded in 1895, whose field of exploitation was Ger- 
many, was able to maintain its independence. The 
seventy-five small refineries existing outside the 
Trust did not refine, all put together, a fifth as much 
as the Standard, The refinery which the latter pos- 
sessed at Bayonne was by itself more important than 
ten of these competing refineries. 

The European market was almost completely con- 
quered. Everywhere the Standard operated by 
means of its subsidiary companies: — 

The Anglo-American Oil Company in Great Britain. 

The American Petroleum in Holland. 

The Deutsche Amerikanische Petroleum Gesellschaft 

in Germany. 
The Société pour la Vente du Pétrole in Belgium. 
The Vacuum Oil in Austria-Hungary. 
The Societa halo-Americana per Petrollo in Italy. 
The Romana-Americana in Rumania. 
The Danske Petroleum Altieselskabet in Denmark. 
The Swenska Petroleum Altiebolage in Sv/eden. 
The International Oil in Japan. 

In Galicia, the Trust held its own against all sim- 
ilar indigenous enterprises. The Rumanian refiners 



52 THE WORLD-STRUGGLE FOR OIL 

were obliged to come to an understanding with it; 
otherwise it would, with its powerful means of pres- 
sure, have created a monopoly for itself. And the 
French Oil Cartel was at its mercy. 

Causes of the Success of the Standard 

The difficulty is not to produce oil, but to trans- 
port it, for it is generally found in more or less des- 
ert regions. Hence Rockefeller's brilliant idea, to 
construct pipe-lines bringing the oil direct to the 
great centres! Thenceforward, since the oil was 
transported almost automatically, its price dropped 
considerably. All the producers became tributaries 
of the pipe-lines, and the Standard obtained prac- 
tically complete control of the market. 

This was the first cause of the success of the Stand- 
ard. All the small producing companies became 
compulsorily its clients. As controller of the mar- 
ket, it fixed the price in dracpnian fashion. 

There is a second cause: its alliance with the great 
railway companies, and the support which it re- 
ceived from the railway magnates — Scott of the 
Pennsylvania Railroad, Vanderbilt of the New York 
Central, Jewet of the Erie Railroad, Watson of the 
Lake Shore, and many others less well known. 

Its subsidiary, the South Improvement Company, 
on January 18, 1872, made contracts with the rail- 
way companies, by which it fixed the proportionate 



THE STANDARD OIL COMPANY 53 
shares in the transport of oil to the Atlantic seaboard 
as follows: — 

27^ per cent, to the Erie, 

27J per cent, to the New York Central, 

45 per cent, to the Pennsylvania. 

The companies thus favoured by the Standard 
made their competitors pay double rates. One of 
these latter produced before the Inter-State Com- 
merce Commission the scandalous tarififs demanded 
of them: 

On the Louisville and Nashville Railroad, in- 
creased rates to competitors of 87 to 333 per cent. ; 

On the Cincinnati, New Orleans, and Texas Pa- 
cific, from 63 to 267 per cent. ; 

On the St, Louis, Iron Mountain and Southern, 
from 82 to 257 per cent. 

Systematic negligence in transport was proved with 
regard to competitors. The Union Tank Line Com- 
pany, which owns tank-wagons as the International 
Sleeping Car Company owns restaurant cars, would 
only put them at the disposal of the Standard, and 
compelled its adversaries to dispatch their oil in 
barrels, which is much more costly. The Trust alone 
was entitled to lay its pipe-lines beside the railway- 
lines or underneath the track. It possessed 35,000 



54 THE WORLD-STRUGGLE FOR OIL 
miles of such lines at the end of last century — or 
rather the National Transit Line, which acts as its 
instrument, owned them. Such abuses could not be 
allowed to continue. The inquiry by the Hepburn 
Committee revealed a multitude of crying injustices. 
For example, it was enough for the Standard or the 
South Improvement to telegraph 'Wilkinson and Co. 
have received a truck which only paid $41.50; screw 
them up to $57.50," and the order was executed. 
The Charter of the South Improvement, which had 
even succeeded in acquiring the right of expropria- 
tion in order to construct its pipe-lines, was with- 
drawn imder the pressure of indignant oil-producers. 
But the Federal Government of the United States will 
never succeed in crushing the Standard Oil. 

Its Two Dissolutions — Roosevelt's Fight 
against the standard oil 

Twice over, in 1892 and 1911, its constitution was 
judged illegal, but in vain. 

In 1892 the system of nine trustees was declared 
illegal by the Supreme Court of Ohio. The trustees 
voted the dissolution of the Trust, but continued to 
administer all the corporations in the same way until 
1899. The Trust was apparently divided into twenty 
distinct companies; the nine old trustees distributed 
the shares in such a way as to possess the majority 



THE STANDARD OIL COMPANY 55 

in each one. Thus they made sure, as before, of 
unity of direction. Rockefeller had reversed the 
judgment of the court. 

Here is the legal formula, which is dignified in 
its simplicity: "John Rockefeller has placed in the 

hands of the said attorney ^— — of the total shares 

^ 292,500 

held by the said trustees on July 1, 1892, in each of 
the companies whose shares were deposited." 

Still better, after receiving the shares which were 
granted them in each company, the old trustees took 
them and sold them to the Standard Oil Company of 
New Jersey, which has a capital of 100 million dol- 
lars of common stock, and only ten million dollars of 
preferred stock. For the Standard has a monarchi- 
cal constitution. All power to the holders of pre- 
ferred stock! The holders of common stock have 
none but that of drawing dividends. Though they 
may be in an enormous majority, they count for noth- 
ing in the direction of the enterprise. 

About 1900 Rockefeller went still further. He 
increased the number of ordinary shares, and re- 
duced that of the privileged shares. A memorandum 
of the Industrial Commission drew attention to this. 
"During the year 1900, the common stock has been 
increased by 38,550,700 dollars and the preferred 
stock has been reduced by 3,968,400 dollars." 

In short. Rockefeller makes the concern more and 



56 THE WORLD-STRUGGLE FOR OIL 

more autocratic. The Standard forms a veritable 
State within a State, which nothing can bend. The 
Trust was reconstituted, with a holding company, the 
Standard Oil Company of New Jersey^ holding the 
title-deeds of all the other companies. 

It was then that Roosevelt undertook to destroy a 
power before which everything bowed down. The 
Federal Government brought an action before the 
Court of St. Louis, under the Sherman Anti-Trust 
Law. The Standard Oil and the seventy companies 
dependent on it were accused of "conspiracy, coer- 
cion, intimidation, rebating and other illegal acts in 
restraint of trade." The Federal Court of St. Louis 
ordered the dissolution of the Trust in 1909. The 
Standard entered an appeal before the Supreme 
Court of the United States, which confirmed the dis- 
solution in 1911, after five years of inquiries, pros- 
ecutions, judgments and appeals. The struggle had 
been going on since 1906. Many judgments had to 
be reversed. Thus, the Standard Oil Company of 
Indiana, with a capital of only a million dollars, was 
ordered to pay a fine of 29 million dollars for an il- 
licit understanding with the Chicago and Alton Rail- 
way. It was paying only six cents a hundredweight 
for transport, while its competitors paid eighteen. 
This judgment was reversed in July 1908 by the 
Court of Appeal of Chicago. "It is strange," ran 
the decision "that a company with a capital of a mil- 



THE STANDARD OIL COMPANY 57 
lion dollars should be fined a sum representing 
twenty-nine times this capital." The first tribunal 
had found 1,462 infringements proved, and had zeal- 
ously applied the maximum for each case; that is how 
it had arrived at the incredible figure of 29 million 
dollars. 

The Standard Oil was given six months to dissolve. 
The result was the same as in 1892. There were 
simply thirty-four companies apparently independ- 
ent. In the midst of this new constellation, the 
Standard Oil Company of New Jersey, whose capital 
has risen to 600 million dollars, merely shines with 
a greater brilliance than its satellites. And the 
Standard has no longer to fear attack from the Gov- 
ernment of the United States, which bows obediently 
to its will. Even better, the late President Harding 
energetically supported its claims throughout the 
world. Whoever attacks the Standard attacks the 
Federal Government itself. 

To think of Rockefeller's modest company in 1870, 
with its 600 barrels a day and its small capital of a 
million dollars, and to see what it has become to- 
day, is to be lost in amazement. In 1920, the Great 
Council of the Standard controlled a capital of a 
thousand million dollars; representing almost equal 
profits, and a daily consumption of two hundred mil- 
lion barrels, which it even hopes to see presently in- 
creased to three hundred million. Here are the 



58 THE WORLD-STRUGGLE FOR OIL 
original and the present positions; they are widely 
different: — 

Capital has increased from 1 to 1,000. 
Profits have increased from 1 to 100,000. 
Production has increased from 1 to 300,000. 

The Standard has soared so high because it was a 
national enterprise. Every bank, every shipping 
company, every railway in the United States, was 
interested in the success of the Trust, for this great 
corporation exported to the four comers of the world 
a commodity drawn from the soil of the Union, and 
brought into the country, one year with another, more 
than a hundred million dollars. It looked as though 
all competition was impossible, and yet a European 
company has been found bold enough to attack, not 
only in Europe and Asia, but on its own ground of 
the United States, this financial power, whose turn- 
over must be estimated at twelve thousand million 
francs at least, or more than twice the pre-War 
budget of a nation like France. 



CHAPTER V 
THE ROYAL DUTCH-SHELL 

In face of the formidable hegemony which the 
Standard Oil exercised over the oil markets of the 
world, an opposition arose, at first timid, then bolder 
in proportion as success attended its efforts. 

This was the Royal Dutch allied to the Shell. 
Thirty years have sufficed to give it a unique position 
in the world. 

It was in 1890, at The Hague, that the Royal Dutch 
Oil Company ^ was founded, with a capital of 1,300,- 
000 florins. As a result of borings carried out in 
the Sunda Islands, the Government of the Dutch In- 
dies granted it concessions at Sumatra. After some 
years, as the sale of crude oil did not give a sufficient 
return on the capital already sunk, the directors of 
the young company resolved to erect a refinery on 
the spot. It was necessary for this purpose to in- 
crease the capital to 1,700,000 florins in 1892. A 
strange fact to relate to-day, this issue was a failure. 

1 The Netherlands were then in the position in which France now 
finds herself. The Royal Dutch began by sending two engineers to 
the United States to familiarize themselves with the details of oil 
production, since Holland possessed no such industry. 

59 



60 THE WORLD-STRUGGLE FOR Olt 
The capitalists of the day had lost confidence in an 
undertaking whose net profits for two years had 
been nil. In spite of these initial difficulties, the 
board of directors persevered. It even acquired 
new concessions, whose more profitable exploitation 
allowed of a first dividend in 1894 of 8 per cent. 
This distribution restored the confidence of the pub- 
lic, and the Royal Dutch was able to increase its 
capital without difficulty in 1895 to 2,300,000 florins, 
with a view to extending its sphere of action. In 
the same year it was able to distribute a dividend of 
44 per cent. Considering the importance of its op- 
erations, the company decided in 1897 to increase 
its capital to 5,000,000 florins, in order to obtain 
tank steamers to transport its products. The divi- 
dends had then risen to 52 per cent., but it could not 
keep up for long so exceptional a rate. For, from 
1898 onward, the Standard, becoming uneasy, tried 
to obtain control over its rival. To escape from its 
grip, the Royal Dutch was compelled to issue one and 
a half million preference shares, which were allot- 
ted to friendly groups. A bitter economic struggle 
followed. The Royal Dutch maintained its inde- 
pendence, but the Standard, to destroy its young 
rival, did not hesitate to sell in extra-American 
markets at less than cost, and the steady lowering of 
the price of oil compelled the Dutch company to re- 
duce its dividend to 6 per cent. It was maintained 



THE ROYAL DUTCH-SHELL 61 

at this rate the following year, but began to rise again 
in 1900, and reached 24 per cent, in 1901. 

Since then the Royal Dutch has progressively in- 
creased its capital to the present fantastic figure, 
under conditions which were so many windfalls for 
its shareholders. Its dividends during the great 
world War rose to the enormous rates of 45, 48 and 
even 49 per cent. There were some years when it 
went so far as to distribute to its shareholders divi- 
dends in shares of 200 per cent., thus tripling its 
nominal capital. 

The Alliance with the Shell 

The early career of the Royal Dutch was as modest 
as that of the Standard Oil and far more troubled. 
At its very beginning it found in the East a young 
British firm, the Shell Transport and Trading Comr 
pany, which put up a keen competition, the more 
disastrous because the latter possessed a fleet of tank 
steamers, while the Royal Dutch as yet had none. 
The Shell was directed by Sir Marcus Samuel, one 
of the cleverest business men in London. 

Samuel had begun humbly as a trader in sea- 
shells. His business prospering more and more, he 
hunted about for some commodity to exchange for 
the shells which he brought from the East. He de- 
cided upon oil, and became himself a producer in 
Borneo. 



62 THE WORLD-STRUGGLE FOR OIL 

In 1897 the Shell was registered in Great Britain, 
with the view of absorbing the business of Samuel 
and Company and certain other similar concerns. 
The new company had a large number of tank 
steamers and hundreds of depots. 

The Royal Dutch had then amalgamated the greater 
number of the independent producers of the Sunda 
Islands, but was experiencing some difficulty in get- 
ting its oil to Europe, and so decided to negotiate 
with the Shell, 

Hence the agreement of 1902, by which the two 
companies entrusted the sale of their products to a 
company which they created specially for the pur- 
pose, the Asiatic Petroleum. Its capital was sub- 
scribed as follows: — 

J by the Royal Dutch, 
i by the Shell Transport, 
■J by the Rothschilds. 

This simple alliance became a complete union ten 
years later. The Royal Dutch and the Shell amalga- 
mated on the following basis: — 

On January 1, 1907, the two groups transferred 
their assets to two companies, one Dutch, one British. 
These were the Bataafsche Petroleum Maatschappij 
and the Anglo-Saxon Petroleum. 

The Bataafsche, or Batavian Oil Company, which 
now has a capital of 200 million florins, was 



THE ROYAL DUTCH-SHELL 63 

specially entrusted with the extraction of oil and 
with everything concerning its production. Its oil- 
fields are situated in Java, Sumatra and Borneo, and 
it exploits them directly or by subsidiary companies. 
I It has interests in the Mexican Corona company and 
in many Russian companies. 

Although this last part of its program has not 
hitherto been productive, the Bataafsche has distrib- 
uted during the last few years dividends representing 
annually nearly half its capital. Directly or indi- 
rectly, it is responsible for almost the whole pro- 
duction of the Dutch Indies, which amounts to nearly 
20 million barrels annually, and is steadily rising. 
To meet this increase, the Batavian Oil Company is 
obliged every year to construct new reservoirs. In 
1920 their capacity had reached more than 900,000 
tons. 

The Anglo-Saxon Petroleum, with its head-quarters 
in London, was entrusted with everything concerning 
the transport and sale pf oil, that is to say, with the 
commercial side of the business. Unlike the Bataaf- 
sche, this company undertakes no direct exploitation, 
although it controls the production of a large number 
of subsidiary companies in Ceylon, British India, 
Malay, Northern and Southern China, Siam, the 
Philippines, Australia, New Zealand and South 
Africa. For the Royal Dutch-Shell has an almost 
organic structure. Instead of reproducing itself in 



64 THE WORLD-STRUGGLE FOR OIL 

new companies, always the same, like the Standard 
Oil, it only receives new adherents for distinct func- 
tions. One company is entrusted with the distribu- 
tion of its products, another with the exploitation of 
oil-fields or with refining. The Royal Dutch and 
the Shell have become to-day holding companies. 
In 1907 the Royal Dutch ceased to be an indus- 
trial enterprise and became an omnium of oil 
securities. 

Forty per cent, of the profits resulting from this 
co-operation were to come to the Shell, 60 per cent, 
to the Royal Dutch, which has reserved the lion's 
share for itself. 

At the time of signing this agreement the Shell 
was not without a certain anxiety. Thus it was 
agreed, in order to safeguard its interests, that the 
Royal Dutch would buy, on January 1, 1907, half 
a million ordinary shares of the Shell at the price 
of thirty shillings, and would undertake not to sell 
again without the consent of the board of directors of 
the Shell. 

In case of liquidation or sale by private contract 
before January 1, 1932, it was stipulated that the net 
product of the liquidation, up to £9,000,000 sterling, 
was to be divided equally between the Shell and the 
Royal Dutch, and that only above this amount the 
products should be shared in the proportion of 40 



THE ROYAL DUTCH-SHELL 65 

and 60 per cent. We see how closely these two con- 
cerns are allied. The only difference which exists 
between them is that, officially, one is Dutch, the 
other British. 

Deterding's First Victory. The Chinese 
Campaign 

Freed from all obstacles in the Dutch Indies and 
allied with one of the most powerful British firms, 
the Royal Dutch, under the skilful guidance of 
Henry Deterding, was ready to attempt a conquest 
of the world. 

But for the second time it came up against the 
hostility of the Standard Oil, which waged a bitter 
warfare in the Far East — the famous price-war of 
1910. 

The Standard Oil of New York considered China as 
its private property. It had taught the Chinese to 
use kerosene by distributing, free of charge, lamps 
inscribed Mei Foo, or Good Luck. When this 
method became too expensive it sold them at cost 
price, and when the Royal Dutch appeared as a com- 
petitor it was selling, in this way, two million lamps 
a year. With a population of 400 million Chinese, 
this produced an unlimited market for kerosene, for 
which, in comparison with petrol, the American de- 
mand is small. 



66 THE WORLD-STRUGGLE FOR OIL 

The Standard tried to fight by selling refined oil 
below cost price in foreign markets, while keeping 
the price very high in America in the shelter of the 
tariff wall. It even went so far as to sell in the Far 
East 50 per cent, lower than in Holland, although the 
latter market was nearer the American oil-fields. At 
the same time the refined American oil, which was 
quoted in England at the end of August 1910 at 
6%d. a gallon, fell at the end of November to 5%d., 
and in December to 5%d. Deterding's receipts 
from the sale of kerosene were reduced by 3,750,- 
000 dollars. But he would not give way. He did 
not leave China; he stood his ground and fought. 
Although his oil was of an inferior quality to that of 
the Standard, it was near at hand, and had not to be 
transported for long distances like that of its rival 
(which involved the latter in great expense). An 
agreement was finally made. The Standard, which 
had taken possession of the Chinese market in 1903, 
gave up 50 per cent, of that trade to the Royal Dutch. 
The latter's share has even been increased recently 
to 60 per cent. For the first time Deterding had 
conquered! 

Perhaps he would not have triumphed so easily 
if the Standard Trust had not been dissolved just at 
that time by the Supreme Court of the United States. 
But two such powerful groups could not have con- 



THE ROYAL DUTCH-SHELL 67 

tinued indefinitely to struggle for the international 
market without making sure of some stability and 
limiting their respective zones of operation. 

After many attempts they have come to an under- 
standing. 

In 1907 an agreement fixed the quota of oil that 
each group might send to the British market. 

In 1912 an agreement of a similar kind put. an 
end to the struggle that had been going on in the Far 
East. 

The absence of a definite general agreement be- 
tween the two great Trusts did not exclude the possi- 
bility of tacit agreements, which regulated their op- 
erations in the international market and assured to 
both an extraordinary prosperity. The Standard 
has several times made very tempting offers of close 
co-operation to the Royal Dutch, leaving this group 
free to make its own conditions. The Royal Dutch- 
Shell has always refused, for the future is its own. 
What will happen to the Standard, an almost exclu- 
sively American concern, when the oil resources of 
the United States are exhausted? Since 1919 it has 
been endeavouring to acquire oil-fields in the rest of 
the world, to guard against this danger, but every- 
where it finds the "closed door." The Royal Dutch, 
aided by the British Government, has taken posses- 
sion of all that remain in the world. 



68 the world-struggle for oil 

New Struggle with the Standard Oil 
FOR THE Conquest of the World 

One day, to the great astonishment of everybody 
interested in the American oil industry, Mr. Deterd- 
ing brought a cargo of oil to the United States and 
sold it under the very nose of the directors of the 
Standard Oil. Emboldened by this first success, he 
tried to establish himself in the United States, and 
with this aim in view bought oil-bearing properties 
in Oklahoma. The Royal Dutch rapidly increased 
its territory. 

By a bold policy and without recourse to the sharp 
practices pf the directors of the Standard Oil, 
Deterding revenged himself for the attack upon him 
in the Far East. The Royal Dutch sent large quanti- 
ties of petrol to America and sold them at rates as 
high as those of the Standard. This enabled it to 
make good its losses in the Old World and to emerge 
victorious from the struggle. 

During his Chinese campaign Deterding had been 
handicapped by the inferiority of the oil from Bor- 
neo. To remedy this he proposed to obtain posses- 
sion of various Calif ornian wells. 

Of all the wars that Deterding has waged, that of 
California is the most interesting and perhaps the 
most strenuous. It required a remarkable audacity 
for the Royal Dutch to establish itself on the very 



THE ROYAL DUTCH-SHELL 69 

territory of the Standard in America. Would it not 
meet there the coalition of this great firm and the 
independent oil companies? And yet Deterding tri- 
umphed. He created the Roxana Petroleum Com- 
pany in Oklahoma, the Shell Company of California 
on the shores of the Pacific, and then extended his 
conquests to Texas, New Mexico, Colorado, Utah, 
Arizona, Montana, Dakota and Nevada. Every- 
where the Royal Dutch brings with it its curious meth- 
ods. It begins by taking an option for six months on 
an oil bearing property, giving it the right to examine 
the books of the company and to make an inquiry. 
At the end of six months it takes an option on another 
property, and continues in this way throughout the 
region. After leaving nearly all the options without 
sequel, the Royal Dutch is ready to begin boring op- 
erations on its own account in selected places. 

This method, adopted for the first time in Cali- 
fornia, is to-day the habitual method of the Royal 
Dutch-Shell, Thus this company rarely makes mis- 
calculations in the oil-fields it exploits. Its agents 
have orders to report the minutest details to head- 
quarters. 

In order to interest the American public in the suc- 
cess of his enterprise, Deterding was clever enough 
to place upon the New York market, in 1916, 220,- 
000 so-called American shares. This issue was a 
great success, and it has thus become against the in- 



70 THE WORLD-STRUGGLE FOR OIL 

terest of many Yankees for the United States Govern- 
ment to start reprisals against the Royal Dutch, of 
which the late President Harding has often spoken. 

In 1915 the Royal Dutch already controlled one- 
ninth of the American output. One-third of its total 
production comes to-day from the United States, It 
has obtained for its pipe-lines the right of passage 
to St. Louis and the river, and its surveys of Vir- 
ginia and Louisiana are complete. It owns the 
great refineries of Martinez, near San Francisco, and 
of St. Louis and New Orleans. 

Seventy-five per cent, of the Califomian output, 
which exceeds ten million tons, now escapes the con- 
trol of the Standard Oil. 

But more than this, the Royal Dutch is gaining pos- 
session of the deposits of Mexico and Venezuela. 
The oil-bearing territories of Tampico and Panuco, 
the railway, and the local oil companies belong to 
Mr. Deterding. The importance of this region is 
well known. Its geographical position, a few miles 
from the sea, and its nearness to the Panama Canal 
double its value. Three hundred and fifty kilo- 
metres by sea, one hundred and seventy-five by pipe- 
line across the isthmus of Tehuantepec, and the oil 
can be delivered at a centre which commands the 
whole South American market. 

Not content with conquering the Standard Oil on 
its own ground, Deterding also caused it to lose its 



THE ROYAL DUTCH-SHELL 71 

"Algeria." Master of the Mexican Eagle, which he 
bought from its founder, Lord Cowdray, in 1918 for 
more than a thousand million francs, he controls 
to-day the bulk of Mexican production. By this 
master-stroke he increased by 50 per cent, the quan- 
tity of oil that the Royal Dutch can offer to the world. 
The Americans felt the loss very keenly, for hitherto 
all the output of the Mexican Eagle had gone to 
the Standard Oil, 

The Mexican Eagle had a large number of tank 
steamers, the acquisition of which brought up the 
fleet of the Royal Dutch-Shell to more than a million 
tons. 

Moreover, the directors of the Royal Dutch do not 
hesitate to assert that the oil-bearing district of Ven- 
ezuela, of which, since their agreements with the 
General Asphalt Company, they control more than 
15,000 square miles, is as rich in oil as the district 
of Tampico. That is why they have put up enormous 
buildings, both warehouses and refineries, at Cu- 
raçao. The Shell, which has operated for four or 
five years in Venezuela, has just overcome the diffi- 
culties of approaching the coast by constructing a 
flotilla of tankers of very small draught, thus per- 
mitting the transport of oil from Maracaibo to 
Curaçao. 

The Panama Canal itself is seriously menaced. 
The United States have spent more than 300 million 



72 THE WORLD-STRUGGLE FOR OIL 

dollars in constructing the canal, and now American 
vessels are going to be dependent upon the Royal 
Dutch for oil. Mr. Deterding has a depot at one 
end of the canal and another at the entrance to the 
gulf. He dominates American commerce. 

This is indeed a work of conquest. Mr. Deterding 
follows the commercial example of Great Britain. 
He has stations at all the strategic points of the world. 
He also controls the Suez Canal at both ends. The 
capacity of the refinery at Suez has been increased 
by 7,000 barrels a day, on account of the increase in 
the tonnage passing through the canal during the 
War. Mr. Deterding is building a station on the 
Cape Verde Islands, situated just half-way between 
Africa and America. He has establishments at the 
Antipodes, in the East and West Indies, on the 
west coast of South America, on the coast of Africa, 
and at the Azores. The European market, in par- 
ticular the French, is dependent on him. Through 
the instrumentality of M. Deutsch de la Meurthe, the 
oil deposits in Asia, owned by the Rothschilds, have 
come under the Royal Dutch trust, which possesses 
90 per cent, of the capital of the oil companies of 
the Caspian and Black Seas and 25 per cent, of that 
of the New Russian Standard Company of Grosny. 
In August 1920 the Shell bought the Mantasheff and 
the Lianosoff, together with a 40 per cent, interest 
in the Tsatouroff, fearing to see the Standard Oil 



THE ROYAL DUTCH-SHELL 73 

acquire the Nobel properties at Baku. The contract 
was signed in London, but was incompletely carried 
out, for Great Britain hoped to treat directly with 
the Soviets at Genoa and to have no more responsi- 
bility towards the former owners.^ 

A large part of the Rumanian production is con- 
trolled by the Royal Dutch. 

In Germany the Royal Dutch-Shell has an interest 
in the Erdol und Kohle Veranderung Aktien Gesell- 
schaft, the Aktien Gesellschaft fur Petroleum InduS" 
trie and the Deutsche Bergin Aktien Gesellschaft, 

Since 1912 it has established itself in Sweden as 
the Anglo-Swedish Oil Company, to drive out the 
Standard Oil, until then mistress of the market. 
Everywhere the Royal Dutch insinuates itself into 
the good graces of governments, thanks to its elastic 
methods and to the cleverness of some if its direc- 
tors, such as the brilliant Armenian Gulbenkian, who 
has been well named the "Talleyrand of Oil." In 
co-operation with the Belgrade Government, it has 
just formed a new company at Agram, with a capital 
of 50 million crowns, to exploit the oil of Jugo- 
slavia. 

As the Financial Times wrote: "Following the 
creation in France of the Société Maritime des Pet- 

1 A first instalment, representing 70 per cent, of the value of these 
companies, was alone paid. See chap, xvi, The Struggle for the Oil» 
fields of Russia. 



74 THE WORLD-STRUGGLE FOR OIL 

roles and the Société pour V Exploitation des Pétroles, 
the Royal Dutch is able to obtain from the French 
Government an important interest in the oil-fields 
which remain at its disposal." 

Its last triumph was its entry into Spain. The em- 
inently suggestive list of companies controlled by the 
Royal Dutch will give an idea of the network which 
it has spread over the whole world: — 

Shell Transport and Trading Company, 

Asiatic Petroleum Company, 

Anglo-Saxon Petroleum, 

Bataafsche Petroleum Maatschappij, 

Erdol und Kohle Veranderung Aktien Gesellschaft. 

Aktien Gesellschaft fiir Petroleum Industrie, 

Deutsche Bergin A. G, 

Anglo- Swedish Oil Company, 

Asiatic Petroleum (Ceylon). 

Asiatic Petroleum (Egypt). 

Asiatic Petroleum (Federated Malay States). 

Asiatic Petroleum (India). 

Asiatic Petroleum (Northern China). 

Asiatic Petroleum (Philippines). 

Asiatic Petroleum (Siam). 

Asiatic Petroleum (Southern China). 

Asiatic Petroleum (Straits Settlements). 

Anglo-Egyptian Oilfields, 

British Imperial Company (Australia). 



THE ROYAL DUTCH-SHELL 75 

British Imperial Company (New Zealand). 
British Imperial Company (South Africa). 
Astra Romana. 
Caribbean Petroleum. 

Dordesche Petroleum Industrie Maatschappij. 
Dordesche Petroleum Company, 
Sumatra Palembang, 

Nederlandsche Indische Tanks Troomboat, 
Vereinigte Benzinwerke, Hamburg. 
Home Light Oil Company. 
British Petroleum Company. 
Norsk Encelska Mineralojeanie Colaget. 
Shell Marketing Company. 
Italian Company for the Import of Oil. 
British Tanker Company. 
Moebi Hid. 
Ceram Petroleum. 
Ceram Oil Syndicate. 
Société Bnito. 
North Caucasian. 
Russian Standard of Grosny. 
Mazut Company. 
Ural-Caspian Company. 
Grosny Sundja Oilfields. 
New Shibaieff Petroleum. 
Commercial and Industrial Oil Companies of the 

Caspian and Black Seas. 
Mantasheff. 



76 THE WORLD-STRUGGLE FOR OIL 
Lianosoff, 
Tsatouroff. 

Kotoku Oilfields Syndicate, 
United British Refineries, 
New Orleans Refining Company, 
Simplex Refining Company of Panama. 
Panama Canal Storage Company, 
Shell Company of California, 
Californian Oilfields, Ltd, 
W, V, Oil Company, 
Volley Pipe-Line Company, 
Roxana Petroleum Company (Oklahoma). 
Trahola Pipe-Line Company (Oklahoma). 
Shell Corporation of Martinez, 
Shell Company of Canada, 
Roxana Petroleum Maatschappij (Texas). 
Tampico-Tanuco Petroleum, 
La Corona, 
Mexican Eagle, 
Eagle Oil Transport, 
Venezuelan Concessions Company, 
Curaçao Petroleum, 
General Asphalt Company, 
Burlington Investment Company, 
United British Oilfields of Trinidad, 
United British West Indies Petroleum Syndicate, 
Turkish Petroleum, 



THE ROYAL DUTCH-SHELL 77 

Roxana Petroleum Corporation of Virginia. 
Ozark Pipe-Line Corporation, 
Union Oil of Delaware, 
Société Maritime des Pétroles. 
Photogen (Austria, Hungary, Poland). 
Jugo-Slav Petroleum, 

This list is certainly not complete, and it grows 
longer every day. Is it not eloquent by itself? 

The Royal Dutch has penetrated every State in the 
world, assuming everywhere the national colour of 
the country it desires to conquer. 

It has travelled far since it began in the Dutch In- 
dies, with a tiny capital of a million florins and seven 
small tank steamers. Its annual production, which 
was then 25,000 tons, to-day exceeds 15 million tons. 
Its fleet of tankers is one of the most powerful in the 
world. Last year it amounted to 1,400,000 tons. 
And the Royal Dutch controls a capital of twenty- 
two thousand million francs. 

Partial Decline of the Standard 

The Standard Oil is certainly no longer the colos- 
sus of the world. It has never completely recovered 
from the last judgment delivered against it in 1912, 
which compelled it to separate from its subsidiary 
companies. Although the sentence of the Supreme 



78 THE WORLD- Strung LE for oil 
Court could not put an end to the community of in- 
terests which united these — since Rockefeller him- 
self possessed 25 per cent, of the shares of the va- 
rious affiliated companies — it has certainly hampered 
the development of the Standard during the last few 
years. The very heavy taxation imposed upon it 
has also contributed to limit its powers of expansion. 
The American Government takes 44 per cent, of its 
income in the form of taxes. In 1920 Rockefeller 
paid an ordinary federal tax pf 12 per cent, and a 
super-tax of 65 per cent. In fact, Rockefeller and all 
his associates are being driven out of the business 
by the federal taxes. If Rockefeller is the person 
who paid in 1920 the largest sum in income tax ( 14,- 
800,000 dollars), it is clear that the greater part of 
his money is passing from the coffers of the company 
to be invested in Government, State and municipal 
securities which are not taxable. 

Up to about 1890 the Standard Oil reigned as ab- 
solute mistress of the oil market, both in Europe and 
America, But in 1890 the oil from the Caucasus, 
Galicia and Rumania began to break up this mo- 
nopoly. Purely European financial groups, the 
Rothschilds of Paris and Vienna, the Nobels of Swe- 
den, the great German banks, and those of Lille and 
Roubaix which later were to form the "Consortium du 
Nord," became progressively more and more inter- 



THE ROYAL DUTCH-SHELL 79 

ested in the new oil enterprises that were taking 
shape in Eastern Europe. Germany had formed an 
actual Trust, the Europeanische Petroleum Union, 
which, but for the War, would certainly have led to 
German control of all European oil. Instead of only 
two great Trusts fighting for world supremacy for 
the benefit of Britain or the United States, we should 
see a third, claiming Europe and Turkey in Asia for 
its share in the name of Germany. 

But this group, expanding rapidly when war broke 
out, found itself opposed from that moment by an- 
other organization, the Royal Dutch-Shell, which was 
also advancing by giant strides and which concen- 
trated all its power throughout the world against that 
of the Standard Oil. 

The most skilful part of the policy of the Royal 
Dutch was to establish itself wherever there was any 
oil, while the Standard confined itself almost exclu- 
sively to America. This was a great mistake. To 
dominate the production and sale in America was de- 
fensible as a commercial policy so long as the United 
States were the greatest producers of oil. It became 
an error from the day on which important oil deposits 
were discovered in other parts of the world. 

The Standard still has the preponderance in the 
United States, where the Shell only appeared in 
1900, but it is far from controlling 86 per cent, of 



80 THE WORLD-STRUGGLE FOR OIL 
the output, as it did at the height of its power in 
1911. It has been much too negligent about extra- 
American oil deposits. 

In 1890 a representative of the Standard Oil was 
in Java, studying the oil situation in the Far East. 
He urged the Standard to establish itself there before 
any competitor appeared. Hypnotized by the Amer- 
ican market, it refused. 

In a similar way it came into Rumania too late, 
and controls only 10 per cent, of the total output, 
while the Royal Dutch controls 31 per cent. In 
Mexico the Standard also met with the competition 
of the Royal Dutch, which, in combination with Brit- 
ish interests, takes 40 per cent, of the production. 
In Russia its rôle is insignificant. 

This state of affairs has been brought about by 
the errors of judgment of the directors of the Trust. 
The power of the Standard Oil has diminished, and it 
no longer exercises a really effective control ex- 
cept within the United States. Even this control the 
Royal Dutch is striving to filch from it. The latter 
has just formed a new trust, uniting the companies 
hitherto independent: the Doheny group and the Brit- 
ish Pearson syndicate, the Associated Oil, the Okla- 
homa Producing and the Oil Union of Oklahoma, 
with six or eight other undertakings which have been 
successfully conducted during the last few years. 
The Shell is trying to bring in the Mexican Petroleum 



THE ROYAL DUTCH-SHELL 81 

Company of Delaware,^ a sister company to the 
Eagle and the greatest producer in Mexico, which 
has up to now remained faithful to the Standard Oil. 
That is why it bought up large quantities of Mexican 
Petroleum stock in May 1919 on the New York Ex- 
change. If it succeeds the Standard will see its re- 
maining share in Mexico yet further diminished. 

This new Trust has the financial support of the 
Morgans. It is particularly directed against the 
Standard Oil. 

These facts are very litle known in France. The 
Royal Dutch is about to launch a new attack on the 
Standard, or to acquire an interest in a Trust des- 
tined to combat it, which will perhaps end by group- 
ing under its aegis all Rockefeller's competitors. 

The Pearson syndicate, under Lord Cowdray, 
has joined the Royal Dutch. Now, Mr. Doheny him- 
self is coming in too. 

The great oil International develops continuously. 
Where will it end? Already the Standard Oil pro- 
duces no more than 17 per cent, of the oil of the 

^The Mexican Petroleum Company of Delaware has control of 
a large number of companies in the United States and in Mexico, 
which include the following: — 

Mexican Petroleum of California, 

Huasteca Petroleum, 

Tamahua Petroleum, 

Tuxpan Petroleum, 

Mexican Petroleum Corporation, 



82 THE WORLD-STRUGGLE FOR OIL 

United States — it is true that it has always disdained 
the extraction of petroleum — but it refines only 49 
per cent., which is a much more serious matter. 

Rapid Increase in the Activities of the 
Royal Dutch 

Production 

1910 1,600,000 tons 

1913 7,000,000 tons 

1920 15,000,000 tons 

Net Profits 

1907 13,000,000 florins 

1915 29,000,000 florins 

1920 130,000,000 florins 

Dividends 

1907 27f per cent. 

1915 49 per cent. 

Authorized Capital 

1890 1,300,000 florins 

1902 7,500,000 florins 

1910 50,000,000 florins 

1911 100,000,000 florins 

1916 150,000,000 florins 

1918 230,000,000 florins 

1919 400,000,000 florins 

1921 600,000,000 florins 



THE ROYAL DUTCH-SHELL 



83 



FiNANCUL Results of the Royal Dutch since its 
Agreement with the Shell. 



Year 


Gross Profits 

(in 
1,000 florins) 


Prior Charges 

an 

1,000 florins) 


Net Profits 

(in 

1,000 florins) 


DiTidends 
(per cent.) 


1907 


13,657 


242 


13,415 


27Î 


1908 


13,592 


66 


13,526 


28 


1909 


12,978 


66 


12,912 


28 


1910 


14,644 


92 


14,552 


28 


1911 


13,693 


2,652 


11,041 


19 


1912 


26,680 


302 


26,378 


41 


1913 


30,554 


384 


30,170 


48 


1914 


30,937 


571 


30,366 


49 


1915 


30,419 


440 


29,979 


49 


1916 


32,823 


193 


32,630 


38 


1917 


49,740 


5,367 


44,373 


48 


1918 


96,877 


24,487 


72,390 


40 


1919 


118,169 


18,169 


100,000 


45 


1920 


138,736 


9,286 


129,450 


40 


1921 


107,170 


3,071 


104,098 


31 



CHAPTER VI 

THE OIL-WORLD'S NAPOLEON: 

HENRY DETERDING 

t 

If the Royal Dutch has succeeded in its amazing 
effort to reduce the power of the Standard Oil, it is 
because the former possessed a man who was worth 
millions, whom the Americans, in their outspoken 
admiration, have called the "Oil- World's Napoleon" 
— Henry Deterding. 

"Mr. Deterding is Napoleonic in boldness, and 
Cromwellian in depth," said Admiral Lord Fisher, 
the reorganizer of the British Navy in the twentieth 
century. The strongest personality in the oil-world 
is no longer Rockefeller, but Deterding. Supported 
by such men as Gulbenkian, the "Talleyrand of Oil" ; 
Colijn, formerly War Minister to the Netherlands; 
Loudon, Cohen, Stuart, and Sir Marcus Samuel, the 
founder of the Shell and a former Lord Mayor of 
London — Deterding dared to challenge the Stand- 
ard Oil and to keep up the war for twenty years in 
every part of the world, and even to establish him- 
self on the latter's own ground, the United States. 

The Royal Dutch was established in 1890, when 

84 



THE oil-world's NAPOLEON 85 
the Standard ruled as absolute sovereign over the 
markets of Europe and America. De Gelder was 
the first Chairman, but he was soon replaced by the 
more capable Kessler. 

"Old Kessler," as the Royal Dutch people call 
him among themselves, fixed his head-quarters at 
Batavia. Needing an assistant, he engaged the young 
Deterding, who was then employed in a bank at Bata- 
via. It was Kessler who guided the Royal Dutch 
through the difficulties of its early years. But he 
died suddenly in 1900, and Deterding succeeded him. 

While the Standard stuck to the formula, "Amer- 
ican oil to light the world," Deterding set to work 
to acquire oil deposits as near as possible to all mar- 
kets. The new policy extolled by Walter Teagle, 
Qiairman of the Standard Oil of New Jersey, on the 
occasion of the fiftieth anniversary of the company in 
January 1920, is no other than that pursued by De- 
terding for fifteen years. For the Standard Oil, see- 
ing to what a pass its former policy has brought it, 
has sought since 1919 to revise its methods and copy 
those of its rival. 

Five factors have contributed to the world-wide ex- 
pansion of the Royal Dutch. 

1. Deterding's cleverness in associating the Royal 
Dutch with the Shell, and in interesting the Roths- 
childs of Paris in his operations. Thanks to these 
connections, he surrounded himself with able per- 



Ô6 THE WORLD-STRUGGLE FOR OIL 

sonalities, such as Frederick Lane, Sir Marcus Sam- 
uel, Sir Waley Cohen, and Gulbenkian. 

2. The support of the Dutch Government. 

3. The support of the British Government. 

4. The fact that the Royal Dutch had not a mar- 
ket close at hand to absorb its production, in the 
Dutch Indies, as the Standard had in the United 
States. 

5. The readiness of the Dutch and British to pros- 
pect over-seas. 

It is a combination of these forces — personal, po- 
litical, and economic — ^which has resulted in the for- 
mation of the Royal Dutch-Shell group, now a world- 
power. Under the laws of the United States, a sim- 
ilar group would be impossible. 

"Deterding is a plunger," said an American oil- 
man, who has often been a competitor of his in vari- 
ous parts of the world. "He plunges with other peo- 
ple's money, not his own; that is why he takes such 
risks. For instance, he paid five times what any one 
else would have paid to gain a footing in Egypt, and 
he has lost a great deal there. However, he pays in 
shares for the properties he buys, and this gives him 
an advantage over the Standard, which has always 
paid in cash. In spite of everything, he merits great 
praise for having started from nothing and having 
built up the great organization which he directs." 

Deterding's profession of faith, so to speak, is 



THE oil-world's NAPOLEON 87 

summarized in a memorable declaration which he 
made to the Committee of Imperial Defence in 
March 1913:— 

"Oil is the most extraordinary article in the com- 
mercial world, and the only thing which retards its 
sale is its production. There is no other article in 
the world of which you can guarantee the consump- 
tion as long as you can produce it. In the case of 
oil, begin by guaranteeing the production and con- 
sumption will look after itself. There is no need 
to bother about consumption, and as a seller, it is 
useless to make contracts in advance, because oil 
sells itself. All that you need is a well-filled purse, 
so that you are dependent upon no one, and can say 
to the people who will not buy to-day, 'Very well. 
I am going to spend £1,000,000 in building reser- 
voirs, and in future you will have to pay much more!' 
The great point for the Navy is to make certain of oil 
from a group which can draw its supplies from many 
different geographical points, because one cannot 
count on any particular oil-field. My experience 
is that districts which have regularly produced 18,- 
000 barrels a day, have dropped to 3,000 without 
any previous warning." 

Since its alliance with the Shell, the Royal Dutch 
has undergone a world-wide expansion. Deterding 
concluded long-term contracts with the famous Brit- 
ish State-subsidized company, the Anglo-Persian Oil, 



88 THE WORLD-STRUGGLE FOR OIL 

guaranteeing it the greater part of the Persian out- 
put until 1922. But his cleverest stroke was cer- 
tainly to acquire an interest in the management of the 
Mexican Eagle, Owing to this, the output of the 
Royal Dutch-Shell group increased by more than 
50 per cent., rising from thirty to more than fifty 
million barrels a year. The purchase of shares 
from Lord Cowdray cost Deterding a thousand mil- 
lion francs. 

Deterding conducts his business like a soldier. He 
accepts or refuses a proposition once and for all. It 
is often dangerous not to fall in with his wishes. 
The New Schibaïeff Petroleum Corporation has had 
experience of this. Reconstituted in 1913, with a 
capital of £1,150,000, it set itself against the will of 
Deterding. He fought, and at the end of the struggle 
the £1 shares were worth 6%d., at which price the 
Royal Dutch bought them up, at the same time con- 
descending to accept control of the company. 

The establishment of close relations between the 
Royal Dutch-Shell and the British Government was 
one of the most noticeable activities of the oil-world. 
It has not been proved that the British Government 
really controls the Royal Dutch, although well-in- 
formed people believe it. If there has been any 
change in the direction of the Royal Dutch, which, 
according to the constitution of the company, should 
remain in Dutch hands, it must have been effected 



THE oil-world's NAPOLEON 89 

as a result of agreements between the Dutch and Brit- 
ish Governments, for the shares of the Royal Dutch 
were held by interests closely connected with the 
Royal Family of the Netherlands. An alliance of 
this nature would have great advantages. Besides, 
since the British Government has purchased the con- 
trol of the Anglo-Persian, Sir Marcus Samuel has 
made great efforts to induce it to take an interest in 
the Royal Dutch-Shell group. The Royal Dutch has 
become more British than ever since 1922, when it 
ceded the greater part of its share in the Shell to the 
purely British consortium directed by the bank of 
Cull and Company. Deterding would find it diffi- 
cult to do without the support of British foreign pol- 
icy. He knew this very well when he transferred 
his offices from The Hague to London. 

The most striking proof of the alliance between the 
British Government and the Royal Dutch is the course 
of events in India, where the oil situation is pecu- 
liar. In 1905, in exchange for certain exclusive 
rights and for a protective tariff granted by the State, 
the Burmah Oil Company consented to maintain a 
fixed price for kerosene. In India, in an open mar- 
ket, kerosene would cost £25,000,000 sterling in- 
stead of £11,000,000 annually. Such, at least, is 
the opinion of Sir John Cargill, Chairman of the 
Burmah Oil. Before the War, there was overpro- 
duction of kerosene in India; this surplus has since 



90 THE WORLD-STRUGGLE FOR OIL 
been transformed into a veritable dearth. The Royal 
Dutch supplied the Burmah Oil with the petroleum 
that was needed to satisfy the Indian market. 
Thanks to Deterding, India will continue to get its 
oil cheaper than other countries. Without his help 
there would have been a considerable rise in price, 
and the Burmah Oil, in which the British Admiralty 
is interested, would have been weakened, and would 
have fallen into the hands of other companies. 

The Royal Dutch-Shell has rendered the same serv- 
ice to the British Government in Egypt. "We have 
conducted our business on the same lines in Egypt," 
said Sir Marcus Samuel, "//i order to help the Gov- 
ernment, we have operated in the Egyptian market 
in the same way as in India/' 

In exchange the Royal Dutch counts on the support 
of the British Government. This is the case in Vene- 
zuela, where the Venezuelan Government is trying to 
establish its rights over concessions which the com- 
pany covets. And not in vain, for on March 7, 1921, 
it was announced in France that the Venezuelan 
Courts of Justice had upheld the validity of the fifty 
years' concessions which had been granted to the 
Colon Development, in which the Royal Dutch is in- 
terested, through the Burlington Investment. 

But in Mespotamia the company seeks the support 
of France against the Anglo-Persian, and is not op- 
posed to American participation» I believe, rather, 



THE oil-world's NAPOLEON 91 

that it desires the support of the French Government 
in case the British Government, hypnotized by the 
Anglo-Persian, deserts it. In any case, it hopes to 
play off one against the other. 

Deterding's ambition is to crush the Standard Oil, 
He is the declared enemy of the Standard, Mr. W. 
Teagle, for whom he has some sympathy, excepted. 
When people tell him that he will never succeed in 
getting the better of the Standard, with its enormous 
capital, he replies that he has the means to fight 
against all the dollars that the Standard can gather. 
Has he not the Rothschild millions at his disposal? 
Besides, he has great advantages over the Standard. 
I have already mentioned the cost of production of 
the Royal Dutch in the Dutch Indies. It is consid- 
erably lower than that of the American Trust. ^ In 
a price war this would give it an incontestable supe- 
riority. The Royal Dutch-Shell possesses such re- 
serves of oil that the question of exhaustion does 
not arise for it; and it extends over the whole world, 
whereas the Standard has been able to root itself 
firmly in America alone. Several European States 
have crossed swords with it, for example, Austria, 
which definitely closed Galicia against it in 1911. 
Its high-handed methods have made many enemies. 
The Royal Dutch, on the contrary, thanks to its clever 

1 Only for the American portion of its production are the costs 
of the Royal Dutch as high as those of the Standard, 



92 THE WORLD-STRUGGLE FOR OIL 
and elastic policy, has insinuated itself into the good 
graces of most governments. Almost everywhere, 
public opinion is on its side. 

Besides, Deterding knows more about the affairs 
of the Standard than the Standard itself. This state- 
ment was made by a director of the American com- 
pany. Deterding has no difficulty in following its 
movements. On one of his visits to New York, he in- 
stalled himself in the Board-room of the Standard, 
in order to tell the directors that he was not satis- 
fied with the way in which the Chinese agreement was 
respected, that they owed him a rebate on oil sold 
in his preserves, and that they must not sell any more 
there — or it would be war. He spoke for ten or fif- 
teen minutes, and that was time enough to say a great 
deal. Without a note, he quoted many details, and 
even figures; for example, the exact number of gal- 
lons sold by the Standard in various places. And 
when one of his hearers inquired, after his departure, 
whether it was all accurate, another of Mr. Deterd- 
ing's interrogators replied: "Last time he came, 
we took down all his statements in shorthand and 
verified them afterwards. We saw that he had an 
incredible knowledge of our affairs in every country 
in which our interests conflict with his own." 

Will there soon be a renewed conflict between the 
Royal Dutch and the Standard Oil? Deterding 
wanted it quite recently. If we are to believe the 



THE oil-world's NAPOLEON 93 
authorities on the matter, we have narrowly escaped 
the greatest oil war in history. For once, Deterding 
gave way to the moderate counsels of the more con- 
servative members of his company, and war was not 
declared. Mr. Colijn was sent from The Hague to 
the office in Great St. Helen's, in the city of London, 
and it was announced that Mr. Deterding was taking 
a much-needed rest. 

These personal struggles with the Standard are 
probably at an end. 

Agreement is actively sought, at present, between 
the Standard and the Anglo-Persian, especially owing 
to the influence of Sir John Cadman. Since 1922, 
Elliot Alves and the British Controlled Oilfields have 
followed the same policy. Perhaps before long 
there will be an "oil peace," concluded between the 
directors of the great Trusts. Was it not even out- 
lined at The Hague Conference? Time will show 
how long it will last. 

My information, drawn from an authoritative 
source, tends to prove that a great re-grouping of oil 
interests will not long be delayed. 

A true saying, but perhaps a strange one — "Oil 
will be poured on the troubled waters of Europe." 
For economics is more powerful than politics. We 
are at the dawn of the great "Age of Oil." 



PART in 

THE STRUGGLE BETWEEN 
THE POWERS 



CHAPTER VII 

THE EUROPEANISCHE PETROLEUM 
UNION: 

A German Trust for the Control of European 

Oil, which Foundered in the Great World 

Conflict 

The adoption of oil for general use coincided with 
the half-century of prosperity which preceded the 
great catastrophe, the great world War. Between 
1865 and 1914, mazut, kerosene, petrol, vaseline and 
paraffin made their appearance, and spread through- 
out Europe. 

And yet Europe consumed foreign oil almost ex- 
clusively. For a long time, this oil came entirely 
from the United States. It was the golden age of 
the Standard Oil in Europe. Its influence ruled over 
British distributing companies and French refiners, 
over the governments of Germany, Italy, Rumania 
and Spain. 

But the appearance of oil from the Caucasus and 

Eastern Europe rapidly broke up the Standard's 

monopoly. The Rothschilds and the Nobels, the 

Deutsche Bank and the Disconto Gesellschaft ; the 

07 



98 THE WORLD-STRUGGLE FOR OIL 
banks of Lille and Roubaix, exploiting the oil in 
Galicia; the cartel of French refiners founding the 
Polish company, Limanowa and the Aquila Franco- 
Romana in Rumania, and lastly, the Royal Dutch 
through the Astra Romana and the Black Sea Com- 
pany — all multiplied their efforts between 1900 and 
1914 to create various independent oil concerns on 
both sides of the Caucasus and the Carpathians. 

Parallel with these private efforts of manufac- 
turers and bankers, the governments of Europe were 
engaged in safeguarding the independence of their 
States in this complex question of oil. In 1903, the 
French Chamber voted for the principle of monopoly 
in oil. From 1908 onwards, the British Govern- 
ment, through the d'Arcy group, encouraged the for- 
mation of the Anglo-Persian, And, while appear- 
ing to fear the remarkable growth of the Shell, it 
surreptitiously assisted it, and tried to guarantee 
supplies from Mexico through Pearson, from India 
through the Burmah Oil, and from Mesopotamia 
through the Turkish Petroleum in agreement with 
Germany. 

In 1911 the Reichstag was on the point of adopt- 
ing the same course as the French Chamber. Under 
the influence of the Kaiser, important companies 
such as the Deutsche Erdol Aktien Gesellschaft and 
the Deutsche Petroleum Verkaufs Gesellschaft were 
formed to gain control of Austrian, Rumanian and 



THE EUROPE ANISCHE UNION 99 

Caucasian oil. The powerful Steaua Romana, with 
a capital of 100 million francs, owed its existence 
to the latter, which had succeeded in acquiring a 
monopoly of the whole output of the Galician com- 
panies, Schodnika, David Fanto, and Galizische Kar- 
pathen, and had also obtained an interest in the Dan- 
ube Navigation Company, Bayerischer Lloyd, In 
Rumania, the Deutsche Erdol controlled the Konzern 
group, which included the Vega, Concordia, and 
Credit Petrolifer, The oil of Pechelbronn in Al- 
sace was also in its hands. 

In 1906 the Deutsche Bank and the Disconto Ge- 
sellschaft took under their control the great company 
of Nobel Brothers, in Russia. They founded, at 
Bremen, the Europeanische Petroleum Union, a trust 
which amalgamated the principal European oil inter- 
ests, and was to give Germany the certainty of Euro- 
pean preponderance. They absorbed the Akverdoff 
company at Grosny, created the Spies Petroleum, and 
undertook the conquest of the oil industry in the 
Caucasus and in Apsheron. From 1911 to 1914, 
German capital and German interest predominated 
in the whole of Central and Eastern Europe, in Scan- 
dinavia, and even in Turkey, for the Deutsche Bank 
became an associate of Great Britain in the Turkish 
Petroleum, the sole concessionnaire of the Sultan for 
the oil of Mosul and Bagdad. This was the time 
when Sir Ernest Cassel, a little Frankfurt Jew, who 



100 THE WORLD-STRUGGLE FOR OIL 

became one of the lords of British finance and whose 
grand-daughter and heiress married a cousin of the 
King of England in July 1922, was striving to avert 
the impending world War by bringing French, Brit- 
ish and German interests into association wherever 
possible. An agreement was arrived at. The capi- 
tal of the Turkish Petroleum was provided by the 
Royal Dutch, the Anglo-Persian Oil, and the Deutsche 
Bank. 

But for the catastrophe of 1914, Germany would 
have ended by dominating European oil. Probably 
the United States and Great Britain would not to-day 
share between them the lordship over oil. 



CHAPTER VIII 
THE WAR AND OIL 

The War which has just ravaged the world, proved 
that the country which controls oil will one day con- 
trol the earth. It is just as Elliot Alves predicted: 
"Armies, navies, money, even entire populations, will 
count as nothing against the lack of oil." That the 
Allies have won this War is in great part due to the 
two greatest trusts, the Standard Oil and the Royal 
Dutch-Shell, which placed themselves at the service 
of the Entente. Germany, hemmed in on all sides, 
saw her last resources disappear when the Eastern 
front broke up. 

Without petrol for lorries, tractors, motor-cars, 
aeroplanes — ^without heavy oil for ships' boilers and 
factory engines — ^without lubricating oil for all ma- 
chinery, how was it possible to carry out the com- 
bined movements of armies? It was not imtil about 
1916 that people began to say this War would be a 
"war of oil." The army stafifs first grasped its real 
utility during the defence of Verdun, situated at the 
end of a wretched railway with a single line of 
metals. The destruction of many railway lines and 

101 



102 THE WORLD-STRUGGLE FOR OIL 

the inadequacy of the system behind the front led 
the generals to transport their troops more and more 
frequently by motor-lorry. It might be said that 
this War was the victory of the lorry over the railway. 
The last phase, in particular, consisted in a campaign 
of motors and aeroplanes against railways. Rich in 
railway materials, our enemies were poor in petrol. 
Our High Command, at the end of 1918, resolved to 
profit by our superiority on this point. 

Before the War, Germany imported 1,263,000 
tons of oil: 

719,000 from the United States; 
220,000 from Galicia; 
158,000 from Russia; 
114,000 from Rumania; 
52,000 from India. 

From the very beginning of hostilities nearly all 
these sources were closed to her. That is why the 
German General Staff fought so hard for Galicia, 
then for Rumania, and finally for the Caucasus. 

"As Austria could not supply us with sufficient 
oil," wrote Ludendorff in his Memoirs, "and as all 
our efforts to increase production were unavailing, 
Rumanian oil was of decisive importance to us. But 
even with deliveries of Rumanian oil, the question 
of oil supplies still remained very serious, and 
caused us great difficulty, not only for the conduct 



THE WAR AND OIL 103 

of the War, but for the life of the country. The 
stocks of the Caucasus opened a more favourable 
prospect for us in 1918." 

"The eastward march of the central empires is 
thus explained as due to the urgent need for the con- 
quest of oil. The treaty of Bukarest was an 'oil 
peace,' as also was that of Brest Litovsk. 

"In Rumania, Germany seized all the oil-deposits, 
all the refineries, all the pipe-lines, and altered and 
reorganized them according to the immediate needs 
of her armies. For the benefit of her dependent 
company, the Steaua Romana, she plundered all the 
properties of the British, Dutch, French, or purely 
Rumanian companies. 

"It was then that she destroyed the Baïkop-Con- 
stantza pipe-line and relaid the pipes on a military 
route from Ploesti to Giurgiu. It was then that the 
economic staff of her army founded in 1917-18 the 
Erdol Industrie Anlagen Gesellschaft, which seques- 
trated, liquidated, despoiled all the other oil com- 
panies and collected the booty for its own profit in 
a vast monopoly of exploitation and distribution. 
This monopoly was only broken in August 1918, by 
the double victories pf the Allies on the Eastern and 
Western fronts." ^ 

When the Eastern front gave way, Germany's re- 
sources vanished. She had left only her benzol, a 

1 H. Bérenger: La Politique du Pétrole, 1920, 



104 THE WORLD-STRUGGLE FOR OIL 
little heavy oil, and no lubricating oil. She had to 
give benzol to her airmen instead of petrol, although 
knowing perfectly well that their machines would 
thereby lose greatly in power. Her motor-lorries 
were not in use during calm periods; LudendorfF 
kept them for critical moments. And the scarcity of 
oil was so serious in the interior of Germany that the 
peasants passed the long winter evenings in darkness. 

The Allies, also, lived through some tragic mo- 
ments. 

The year 1917 was the most terrible for them. 
Their armies almost ran short of petrol, their navies 
of heavy oils. Now, their armies consumed a mil- 
lion tons of petrol a year, their navies eight million 
tons of heavy oils. The stocks were reduced to such 
a point that, in May 1917 the Grand Fleet had to give 
up its training cruises and battle exercises, for the 
German submarines made a special point of attack- 
ing tankers coming from America or Asia. In 
France and Italy, the use of oil and even petrol was 
severely restricted. 

In December 1917, when the cartel of the ten 
French refiners, which had undertaken to supply the 
French armies, recognized that it was powerless, and 
had to admit in an official letter that its stocks would 
be exhausted in March 1918, on the eve of the spring 
campaign, M. Clemenceau sent a despairing appeal 
to President Wilson. The representative of the 



THE WAR AND OIL 105 

Commander-in-Chief had pointed out that France did 
not possess in its storage depots sufficient reserves to 
last more than three days in a situation like that of 
Verdun. 

Here is the text of the historic telegram: "At the 
decisive moment of this War, when the year 1918 
will see military operations of the first importance 
begun on the French front, the French army must 
not be exposed for a single moment to a scarcity of 
the petrol necessary for its motor-lorries, aeroplanes, 
and the transport pf its artillery. 

"A failure in the supply of petrol would cause 
the immediate paralysis of our armies, and might 
compel us to a peace unfavourable to the Allies, 
Now the minimum stock of petrol computed for the 
French armies by their Commander-in-Chief must be 
44,000 tons and the monthly consumption is 30,000 
tons. This indispensable stock has fallen to-day to 
28,000 tons and threatens to fall almost to nothing 
if immediate and exceptional measures are not un- 
dertaken and carried out by the United States. 

"These measures can and must be undertaken with- 
out a day's delay for the common safety of the 
Allies, the essential condition being that President 
Wilson shall obtain permanently from the American 
oil companies tank steamers with a supplementary 
tonnage of 100,000 tons. This is essential for the 
French army and population. These tank-steamers 



106 THE WORLD-STRUGGLE FOR OIL 

exist. They are sailing at this moment in the Pa- 
cific instead of the Atlantic Ocean, Some of them 
may be obtained from the fleet of new tankers under 
construction in the United States. 

"President Clemenceau personally requests Presi- 
dent Wilson to give the necessary Government au- 
thority for the immediate dispatch to French ports 
of these steamers, 

"The safety of the Allied nations is in the bal- 
ance. If the Allies do not wish to lose the War, 
then, at the moment of the great German offensive, 
they must not let France lack the petrol which is 
as necessary as blood in the battles of to-morrow." 

To "harness the Standard Oil to the victorious 
chariot of the Entente," to use the expression of Mr. 
Page, nothing less was necessary than the official in- 
tervention of the United States Government. The 
Standard preferred to compete with the Royal Dutch 
in the Pacific. 

Wilson put an end to this state of affairs and the 
Petroleum War Board immediately placed aU the 
necessary boats at the disposal of France. Thanks 
to the reserves thus built up, Foch, at the time of 
the great German push in Picardy, was able to bring 
up heavy reinforcements by motor-lorries and fill 
the gaps where the British front had been broken. 
Marshal Foch was able to execute his strategic sur- 
prises only by relying on the 92,000 motor-lorries 



THE WAR AND OIL 107 

and the 50,000 tons of petrol a month, which the 
Government placed at his disposal from March to 
November, 1918. 

The Allied Governments had already decided to 
pool their resources, and had set up the Inter-Allied 
Petroleum Conference, a central body whose task 
was to supply them all. 

It was constituted as follows: 

1. Sir John Cadman, Kembal Cook, Ashdown and 
Graham, representing the British Petroleum Exec- 
utive. 

2. Captain Foley and L. J. Thomas, representing 
the American Petroleum War Board. 

3. Professor Bordas, Controller-General of the 
French Technical Services, and head of the labora- 
tories of the Ministry of Finance; Henry Bérenger, 
Lieutenant Georges Bénard, and the Marquis de 
Chasseloup-Laubat, representing the French General 
Petroleum Commission. 

4. Captain Pozzo and Lieutenant Farina, repre- 
senting the Italian Commission on Mineral Oils. 

The Chairman was Sir John Cadman, a former pro- 
fessor in the University of Birmingham, who has 
played so important a part in British policy during 
the last few years. 

The Inter-Allied Petroleum Conference had a gi- 
gantic task to face. During the last eighteen months 
of the War, it had to procure twelve or thirteen mil- 



108 THE WORLD-STRUGGLE FOR OIL 
lion tons of oil. It succeeded because it was able to 
guarantee the co-operation of the Royal Dutch and 
the Standard Oil in the cause of the Entente. It 
ordered the two trusts to supply each country from 
the nearest producing country. This was a great 
sacrifice for them, as it obliged each trust to refrain 
from fighting in the territory of the other. It ar- 
ranged for the transport of oil in the double bottoms 
of British ships; 1,280 ships were adapted in this 
way, being equivalent to a hundred new tank-steamers. 
And it hurried on the construction of tank-steamers 
in Great Britain and the United States; 600,000 tons 
were built in America and 400,000 in Great Britain. 
During hostilities the Americans tripled their oil 
fleet. 

Its efforts were so successful that, on March 28, 
1918, at the height of Ludendorff's offensive, the 
President of the French General Petroleum Commis- 
sion was able to write to the Prime Minister: 

"France has at her disposal for the battle 170,526 
tons of petrol and 67,000 tons of other oils, instead 
of the 44,000 tons asked for." 

"Thanks to the Inter-Allied Petroleum Confer- 
ence," as M. Henry Bérenger remarked, "never, at 
any moment, have our soldiers lacked a drop of this 
spirit which gives them the necessary means of rapid 
movement and of cornering and defeating the enemy. 
If hostilities had lasted only a few more days, our 



THE WAR AND OIL 109 

victorious troops would have taken, in the Ardennes, 
whole armies whose line of retreat was becoming so 
congested that they must have fallen into our hands 
without resistance. Hence the Germans hastily ac- 
cepted the conditions which were imposed upon them, 
without either hesitation or discussion." (De- 
cember 7, 1918. 

This time, the military and political importance of 
oil was apparent to every eye. On the morrow of 
the Armistice (November 21, 1918), it was cele- 
brated in enthusiastic speeches. And Lord Curzon 
was able to declare, at Lancaster House, "Truly pos- 
terity will say that the Allies floated to victory on a 
wave of oil." 



CHAPTER IX 

AN IMPERIALISM NOT WITHOUT 
GREATNESS 

If the trusts were powerful before the War, they 
are much more so to-day, assisted as they have been 
by the fantastic rise of the dollar and the pound and 
the unheard-of prices at which they were able to sell 
oil during the great conflict. The Europeanische 
Petroleum Union has fallen to pieces; therefore they 
have no longer to fear a third rival. The Royal 
Dutch and the Standard Oil, by helping the Allies, 
have also served their own interests. 

We are living in the midst of a general disorgani- 
zation of the world. Only two nations have found 
their position strengthened by the War: Great Brit- 
ain and the United States. "Sentiment rapidly 
yielded to self-interest." Scarcely was the Armi- 
stice signed when the United States demanded the 
winding-up of the Inter-Allied Petroleum Confer- 
ence. The Standard was eager to regain its liberty. 
In vain France drew attention to her unhappy posi- 
tion, both in Paris and in London, and asked for the 
continuance of the Inter-Allied Conference. Brit- 

110 



IMPERIALISM WITH GREATNESS 111 
ain was not sorry to be able to dispute the oil suprem- 
acy of the United States and to reap the benefit of 
the preparations she had been slyly making for 
several years. 

The British Empire rests on a foundation of coal. 
A new fuel, oil, appears which has such advantages 
over the former that it displaces it everywhere. Un- 
fortunately, Great Britain possesses so little of it 
that Dr. David White, of the American Geological 
Survey, does not even mention it in his estimate of 
the oil deposits of the world. If we take the whole 
British Empire, it contains scarcely 4 per cent, of 
the known resources of the globe. 

Great Britain, to maintain her world supremacy, 
resolved to win the control of oil as she had done 
that of coal. Besides, her coal will only last another 
century. 

It was the silent task of a few men. Their pro- 
ceedings were unknown, even to the people interested, 
and they did not fear to bring conflict into the world 
to win new greatness for their country. Meanwhile 
the United States basked in a false security, trusting 
in their production, which gave them 70 per cent, of 
the world's oil. 

"Ten years ago France and Britain were in the 
same position as regards oil. Each had a few mil- 
lions invested in distant enterprises ; neither had con- 
trol over an indispensable fuel. Suddenly it was 



112 THE WORLD-STRUGGLE FOR OIL 
discovered that a technical invention, the introduc- 
tion of mazut into the furnaces of ships, was going 
to give the United States the power to make all other 
nations her tributaries. At once a few British busi- 
ness men, technical experts, and diplomatists joined 
forces. They decided to wrest from America the 
mastery of this new force. They laid their plans in 
silence and followed them for years with determina- 
tion; they sank millions of money, carried on in- 
trigue in every corner of the world; they fomented 
revolutions and accumulated on their own shoulders 
responsibilities, risks, expenses. 

"Why? To gain money or honours? No! Sir 
Marcus Samuel and Lord Cowdray count their wealth 
in millions; Lord Curzon is at the height of his dip- 
lomatic career. . . . But in Britain, as in America, 
there is a tradition that a successful business man 
has obligations towards the society in which he has 
amassed his millions. He must make a personal 
contribution to its greatness. . . . 

"It is to this tradition that Britain owes her great 
leaders; it is these leaders who have created her 
world-wide Empire, and who, under our astonished 
eyes, have just made possible for her so prodigious 
a development. . . . Their imperialism is a uni- 
versal danger, but it does not lack a certain great- 
ness." ^ 

1 Franci8 Delaisi, Oil: Its Influence on Politics. 



CHAPTER X 

THE STRUGGLE BETWEEN GREAT 

BRITAIN AND THE UNITED 

STATES IN MEXICO 

There is no country in the world where the strug- 
gle for oil between Britain and the United States has 
been so acute as in Mexico. That this country has 
been for many years in a state of perpetual unrest is 
because of the fight for oil concessions. 

The Standard Oil enjoyed practically a monopoly 
in Mexico up to the time when the deposits at 
Tampico were discovered. It was the only firm 
which sold oil there, so it did not scruple to abuse 
its position. It imported crude oil, refined it on the 
spot, and re-sold it at a profit of 600 per cent. Im- 
mediately the oil deposits were discovered, Porfirio 
Diaz, to put an end to this monopoly, granted impor- 
tant concessions to the British firm of Pearson, which 
shortly afterwards founded the Mexican Eagle. 
These concessions were the signal for the newspaper 
campaign which was let loose against Porfirio Diaz 
in the United States, and for the outbreak of the 
Maderist insurrection in Sonera and Chihuahua. 

113 



114 THE WORLD-STRUGGLE FOR Olli 
Rockefeller and Pearson made war on each other with 
the help of Mexican condottieri. The United States 
supported Madero, Great Britain Porfirio Diaz. 

The Standard Oil subsidized the Maderists. Lane 
Wilson, formerly Ambassador of the United States 
to Mexico, actually stated in public, on January 7, 
1913, that the movement on behalf of Madero had 
been paid for by the Standard, and that a document 
lying in the archives of the State Department at 
Washington proved it! Manuel Liyo, an official in 
a high position in the Mexican Ministry of the In- 
terior, stated, before the Committee of the United 
States Senate, that the brothers Madero had con- 
cluded the following treaty with the Standard: — 

I. If Madero is made President, he will grant to 

the Standard all available concessions. 
II. He will withdraw all those granted to Pearson. 

When Madero was made President, the market 
price of the Standard rose in Wall Street by 50 per 
cent. But this triumph did not last long. We are 
often astonished at the continual changes of front 
of the United States, which support the feeble Presi- 
dents in Mexico and oppose the energetic ones. By 
1913 the Daily Graphic and the Vossiche Zeitung 
had discovered the key to this mystery. Ever since 
Pearson obtained a footing in Mexico the Standard 
has poured out gold in floods to drive out the Brit- 



THE STRUGGLE IN MEXICO 115 

ish. It wishes to be the sole mistress of those im- 
mense oil-fields, which have turned out to be among 
the richest in the world. Only 54 million acres are 
being exploited at present, and already Mexico holds 
the second place in world production. Now the Mex- 
ican Minister of Industry and Commerce estimates 
the area of the oil-fields of that country at 150 mil- 
lion acres. Where will Mexico stand when all this 
territory is exploited? 

To arrest the progress of Pearson, the Standard 
sent an emissary to Mexico to demand a monopoly 
of oil exploitation. It offered, in return, the im- 
mediate conclusion of a loan of 200 million Mexican 
dollars. Rockefeller's envoy promised, moreover, 
that the revolution would die down as though by 
magic, while, in case of refusal, it would continue 
until General Huerta was replaced by a more trac- 
table President who would submit to American re- 
quirements. 

Like his predecessor, Porfirio Diaz, General 
Huerta refused to make Mexico the vassal of the 
great trust, and the insurrection redoubled in vio- 
lence.^ 

1 "During the last nine years,'* wrote a New York editor on the 
occasion of the last revolution, "there has not been a single dis- 
turbance in Mexico in which Americans have not taken part by 
lending their aid to the party opposed to the government. . . . Ameri- 
cans have supported Madero against Diaz, Huerta against Madero, 
Carranza against Huerta, Villa and Sapeta against Carranza." 



116 THE WORLD-STRUGGLE FOR OIL 

Tired of the continual struggles which ravaged 
their country for the benefit of the two great Anglo- 
Saxon nations, the Mexicans resolved to profit by 
the European War to win their freedom for ever. 
According to the laws of the country (1884, 1892, 
1910) the owner of the surface was also the owner 
of the subsoil. All that a company had to do was 
to buy the ground and it was at peace with God and 
man. The Constitution of 1917 disturbed this 
peace. "The subsoil," it declared, "belongs to the 
nation." To exploit petroleum deposits a Govern- 
ment permit was required. This permit is only to 
be granted to Mexicans or to foreigners who consent 
to submit to the laws of the country as natives, and 
thus renounce their privileges as foreigners. 

As soon as they received word of these new ar- 
rangements the British and American newspapers 
thundered against the unhappy President Carranza, 
whose fall from power was not long delayed. 
Taught by his example, his successor attempted 
a policy of conciliation, but in vain. The pres- 
ent President, General Obregon, is faced with 
the same difficulties, but holds firm. The Mexi- 
can Government hopes to free itself for ever, 
by means of the Constitution of 1917, from the 
diplomatic interference which has poisoned its 
existence. But the Obregon Government, though 
moderate, is not strong. It is supported by the mid- 



THE STRUCGLE IN MEXICO 117 

die-classes, but has the army and the people against 
it. Now, for some time, unfortunate tendencies have 
been shown by the Mexican people. It has just in- 
dulged in a Communist Congress, with the object of 
"grouping all the forces of the proletariat." 

If President Wilson always maintained a policy 
of non-intervention towards Mexico — a policy, more- 
over, which was severely criticized within the United 
States — ^his successor at the White House meant to 
make himself felt there as well as in other parts of 
the world. President Harding had among his minis- 
ters Mr. Fall ^ of New Mexico, who has always inter- 
ested himself in this question, and who at one time 
made energetic protests. He demanded that Amer- 
ican citizens should not be expelled from Mexico on 
the simple order of the President of the Republic, and 
that a Commission should assess, at the earliest 
moment, the damages suffered by Americans dur- 
ing the Revolution — ^requirements contrary to the 
Constitution. 

Thus I was not particularly surprised to hear that 
the Committee of the United States Senate had un- 
dertaken to recognize the new Mexican Government 
only on the condition that the article of the Constitu- 
tion of 1917 which forbids foreigners to hold min- 

^ Secretary of State for the Interior, an ardent partisan of inter- 
vention. Mr. Fall is a believer in the slogan "Standard Oil must 
prevail.** 



118 THE WÔÏlLÛ-STRUGGLE FOR OIL 
eral rights was not applied to United States citizens. 
The Mexican Eagle, however, is undisturbed. 
Pearson was clever enough, at its formation, to place 
it under Mexican law. His borings have continued 
uninterruptedly, while American companies were 
obliged to suspend operations and wait for Govern- 
ment authority. 

Pearson and the Mexican Eagle 

The struggle between Pearson and the Standard 
Oil became at one time so acute that the United States 
Government acquiesced in the payment by American 
oil companies operating in Mexico of royalties to 
bandits and insurgents as though to the established 
Government.^ The general insecurity was such that 
certain American companies paid 1,500 dollars a 
month to a bandit in the Tampico district on the un- 
derstanding that he would guarantee not to cut their 
pipe-lines. 

Such a state of affairs could not go on for ever. 
After many years of conflict the two companies came 
to a sort of understanding by which they shared the 
exploitation of oil deposits, and when faced by the 
hostility of General Carranza's Government they sent 
a common delegation to the Peace Conference to de- 

1 Evidence of Edward Doheny before Committee on Foreign 
Affairs of the United States Senate. 



THE STRUGGLE IN MEXICO 119 

fend their interests against expropriation by the Mex- 
ican Government. 

In order to centralize its interests, each of the two 
groups founded, after a time, a company for the ex- 
ploitation of the concessions granted to it. It was 
in this way that the Mexican Eagle was created in 
1908, to take up a part of the Pearson ^ interests. Its 
capital, which was originally 30 million Mexican 
dollars, was increased to 50 millions in 1911, on the 
acquisition of the Pearson oil properties in the Tehu- 
antepec region. In 1920 it was 86,277,000 Mexican 
dollars. 

"An institution is the elongated shadow of a man," 
said Emerson. This definition applies very well to 
the Eagle, in the success of which the personality of 
Pearson has been the dominating factor. From the 
earliest days the difficulties it had to struggle against 
were considerable. They would have discouraged 
a man of weaker character and less tenacity. His 
entire production was destroyed in the disaster at the 
Dos Bocal well — an enormous gusher which took fire. 
A fierce price-war was going on at the moment, con- 
ducted by Americans with great persistence for many 
months. Then came the time of unrest and fight- 
ing, and of the civil war to drive the British from 
Mexico. 

1 Since elevated to the peerage under the title of Lord Cowdray. 



120 THE WORLD-STRUGGLE FOR OIL 

However, the Eagle remains, triumphant, possess- 
ing an immense domain of a million hectares in the 
richest regions, extending along the borders of the 
Gulf, in the State of Vera Cruz and the isthmus of 
Tehuantepec. 

Although it holds in reserve the greater part of 
this domain, its output exceeds 100,000 barrels a day. 
One of its wells alone produces in six days as much 
as the Pechelbronn deposits in Alsace yield to 
France in a year (60,000 tons), and, according to .the 
estimates of British experts, its oil-field at Naranjos 
is alone capable of producing before its exhaustion 
a sum of money equal to the whole of the British 
national debt. 

Pearson's war against the Standard Oil was worth 
while. 

1919 

The Royal Dutch-Shell Lays Hands upon 
THE Mexican Eagle 

Towards 1919 the weak spot about the Mexican 
Eagle was its isolation- among organisms so powerful 
as the two dominating groups of the world, the Stand- 
ard Oil and the Royal Dutch-Shell, Isolated pro- 
ducers sometimes lack markets, especially if by their 
geographical position they are far from great centres 
of consumption. This was the case with the Mexican 
Eagle, which, though it remained independent, was 



THE STRUGGLE IN MEXICO 121 

nevertheless obliged to submit to the very burden- 
some competition of the Standard in the sale of its 
products. 

Lord Cowdray held so large a number of shares in 
the Mexican Eagle that to obtain them was practi- 
cally to obtain control of the concern. In 1911 the 
Standard wished to buy them from him; he refused. 
In 1913 the Royal Dutch suffered the same rebuff. It 
had only offered him £2 15s. a share when he wanted 
£3. These shares, which were issued at par — 10 
Mexican gold dollars, that is, 25.90 francs, or 
scarcely more than £1 — have risen at a phenomenal 
rate. Their lowest prices were: — 

1912 36 francs 

1918 83 francs 

1919 126 francs 

1920 398 francs 

And they rose to 712 francs in 1919 and 738 francs 
in 1920! Since then they have depreciated con- 
siderably, as have all oil securities. Skilful ma- 
nœuvres on a large scale provoked a panic among 
holders of Mexican shares, which made it possible 
to buy them at a low price, and led to important oper- 
ations on the Stock Exchanges, beginning in December 
1921 in New York. 

In June 1919 Deterding offered Lord Cowdray £6 
a share; he accepted. The Shell Transport took one 



122 THE WORLD-STRUGGLE FOR OIL 

million, the Royal Dutch a million and a half. 

If Pearson consented to get rid of the controlling 
interest which he had in the vast undertaking founded 
by his genius and perseverance, it was by reason of 
the enormous sums which had to be found before the 
immense resources contained in the oil-bearing prop- 
erties of the Mexican Eagle could be turned to ac- 
count. It can only handle 111,000 barrels a day, 
whereas, since the discovery of the oil-fields of 
Zacamixtle and Naranjos, its production could be in- 
creased, if it were desired, to 700,000 barrels a day, 
that is, about 110 million litres or 110,000 tons a 
day. In order that non-specialists may understand 
the importance of such a yield, we may say that one 
gallon contains 4.546 litres, one barrel (36 gallons) 
contains 163.655 litres, and that six barrels repre- 
sent one ton. The Eagle's first well, which gave, 
to begin with, 100,000 barrels a day, thus yielded a 
daily production of 16,000,000 litres or 16,000 tons 
of oil. And it continued to yield large quantities — 
diminishing progressively, be it understood — until 
November 1919, when it was invaded by salt water. 

The Shell intends to spend several millions within 
the next five years in order to triple the output of the 
Eagle. Very shortly the development of its installa- 
tions will ajlow of its refining 140,000 barrels daily, 
and it is clear that, some time hence, the enormous 
figure of 200,000 barrels daily will be reached, that 



THE STRUGGLE ÎN MEXICO 123 

is, 5 million barrels a month against the present 2% 
million. The Shell's engineers will not push its ex- 
ploitation to the maximum possible, for they wish to 
make the Eagle last half a century. 

In acquiring control of the Compania Mexicana de 
Petroleo El Aguila (the true name of the Eagle) the 
Shell had in view simply to ensure a sufficiency of 



FiNANCTAi. Results 


OF THE Mexican Eagle for 




Eleven Years 






Year. 


Gross Profits. 


Net Profits. 


Sinking Fund 
nnd Reserves. 


Dividend. 




$ 


$ 


$ 


Per cent. 


1911 


1,974,000 


874,000 


194,000 


8 


1912 


5,703,000 


4,265,000 


2,920,000 


8 


1913 


10,488,000 


8,166,000 


3,551,000 


8 


1914 


13,005,000 


9,689,000 


5,857,000 


8 


1915 


14,676,000 


11,215,000 


6,562,000 


8 


1916 


18,082,000 


17,064,000 


8,259,000 


16 


1917 


20,521,000 


12,948,000 


6,922,000 


20 


1918 


28,857,000 


15,860,000 


19,830,000 


25 


1919 


36,868,000 


29,508,000 


11,050,000 


45 


1920 


59,453,000 


54,659,000 


8,952,000 


60 


. 1921 


81,982,000 


69083,000 


34,879,000 


30 



liquid fuel for the British Navy. For the Mexican 
Eagle will soon hold one of the first positions among 
the world's producers. Before long it will furnish, 
by itself alone, one-third of the Mexican production. 
The capital of the Shell was increased in 1919 simply 
with the object of hastening the development of the 
oil-fields it controls. In view of the considerable in- 
crease in Britain's need of petroleum we may believe 



124 THE WORLD-STRUGGLE FOR OIL 
that patriotism was Lord Cowdray's motive also. 
However it may be, the negotiations were concluded in 
June 1919, and it was a master-stroke on the part of 
the Royal Dutch-Shell group, for its position was 
greatly strengthened by this association, which in- 
creased its production of oil by 50 per cent. More- 
over, the Royal Dutch-Shell made a very successful 
deal, since the shares bought at £6 each are now 
worth double on account of the increase of capital at 
par in January 1920 and the new increase in Jan- 
uary 1921 under the same conditions, that is, one new 
for two old shares at par. Since the Mexican Eagle 
came under the control of the great Anglo-Dutch trust 
it has benefited by the incomparable selling power of 
the Shell: the great shipping companies, the Pirrie 
and the Furness-Withy groups, and the Argentine 
railways immediately concluded with it important 
contracts for the supply of oil. And this alliance 
brings the Eagle practically unlimited financial re- 
sources. 

The balance-sheets of the Mexican Eagle are ex- 
pressed in Mexican gold dollars. The Mexican dol- 
lar, which, on the gold basis, is worth about half a 
dollar, was equivalent, at the rate of exchange of 
January 1, 1921, to: — 

8.50 francs. 
2s. 9d. 
0.495 dollar. 



the struggle in mexico 125 

Present Position of the Petroleum 
Industry in Mexico 

Almost the whole of the Mexican petroleum indus- 
try is in the hands of the two great Anglo-Saxon 
nations. 

Seventy per cent, of the capital invested there is 
American in origin, 27 per cent. Angle-Dutch. Now 
Great Britain, in spite of the smallness of the capital 
she has sunk, triumphs more and more. Only 3 per 
cent, of the capital invested in this Mexican industry 
is Mexican.^ 

Production continues to grow at a prodigious rate.^ 
It has risen from 87 million barrels in 1919 to 195 
million in 1921. Edward Doheny declares that it 
will continue to increase for thirty years. Consider- 
able oil-fields are still unexploited along the coast of 
the Pacific, and the Mexican Government officially an- 
nounced the discovery of oil in the islands of the 
Gulf of California in September 1921. The Mex- 
ican Petroleum has just bored a well, the Cerro Azul, 

1 According to official statistics of July 2, 1920, the Mexican 
petroleum industry represents a value of 300 million Mexican dollars. 

Million 
dollars. 
Wells bored and in production 100 

Value of ground on which they are situated 50 

Pipe-lines, railways and rolling-stock 50 

Refineries, buildings and machinery 50 

Various properties, chiefly British 50 

2Cp. chap, ii. Oil: Its Origin, Discovery y and History. 




Years 



o>o>cr>OïO>cno><j>0)cnQ'>'Oc7>CDafiO><y>o>CJi 



Increase of oil producHon in 
Mexico from 1900 ta 1920. 



THE STRUGGLE IN MEXICO 127 

producing 100,000 barrels a day. Two miles from 
this well there is another which yields 260,000 bar- 
rels a day. All these deposits are found at an almost 
uniform depth of 600 metres. It is estimated that 
Mexico can still produce 4,500 million barrels of 
oil. 

There were 367 wells in production in Mexico on 
January 1, 1921, of which 61 belong to the Eagle 
and 34 to the American Petroleum, Other compa- 
nies, with five exceptions, rarely hold more than a 
dozen wells. 

The Eagle stands to-day at the head of all produc- 
ing companies. Here are the four companies which 
produce the most: — 

Mexican Eagle 32 million barrels 

Standard Oil of New Jersey 19 million barrels 

Texas Company 12J million barrels 

Mexican Petroleum 12J million barrels 

Great Britain has played a very clever game. As 
Phelan, the American Senator, wrote: "Her compa- 
nies accommodate themselves to the political views of 
the Mexican Government." Moreover, they have all, 
from the Mexican Eagle down to subsidiary compa- 
nies of the Royal Dutch like the Corona, been placed 
under Mexican law, which shields them from the ef- 
fect of the Constitution of 1917. American compa- 
nies, on the other hand, whether constituted under the 



128 THE WORLD-STRUGGLE FOR OIL 

laws of New Jersey, Texas or Delaware, remain 
foreign companies. 

Since March 1922 they have been working out a 
plan for amalgamation, so as to form a powerful 
American group which could resist the demands of 
the Mexican Government. 

The companies joining the group would be the 
Standard Oil, the Sinclair, the Texas Company of 
Mexico, the Atlantic Refining and the Mexican Petro- 
leum, The Supreme Court of Mexico has decided ^ 
that properties acquired before the Constitution of 
1917 was promulgated would not be confiscated — a 
declaration which has reassured the United States. 

Mexico retains only 4 per cent, of her production. 
In 1920 alone she exported 153 million barrels out 
of the 159 million produced, keeping for home con- 
sumption only 6 million barrels. Seventy-eight per 
cent, of her production went to the United States. 
Every year Great Britain takes from Mexico more 
than 40 million gallons of illuminating oil, benzine 
and fuel oil. Mexico literally saves the world. 
Without her there would be a universal shortage of 
petroleum.^ 

1 July 1920. 

2 Each Mexican well produced as much, in 1920, as 537 American 
wells. 



CHAPTER XI 

A STATE-SUBSIDIZED COMPANY: 
THE ANGLO-PERSIAN 

Although the United States, in spite of the civil 
wars they let loose there, could never drive Pearson 
out of Mexico, they triumphed over him in Central 
America and the chief States of South America by 
the mere force of their prestige. During 1912 
and 1913 Pearson obtained concessions in Costa 
Rica, Colombia, Venezuela, and Ecuador. That 
would have given him a monopoly of the supply 
of oil to all shipping passing through the Panama 
Canal. Washington placed its veto on these con- 
cessions and caused them to be annulled in the name 
of the Monroe Doctrine. No South American repub- 
lic dared to resist. 

Meanwhile the Shell installed itself in Trinidad, a 
British colony, then in Venezuela and Colombia. To 
quiet all fears it was wise enough to associate itself 
with American firms: for example, the Colon Devel- 
opment was founded, a British company constituted 
in common with the American Carib Syndicate. It 
has since come out that all the British shares are 

129 



130 THE WORLD-STRUGGLE FOR OIL 
grouped in the hands of the Burlington Investment, 
which is itself dependent on the Royal Dutch-Shell. 
Not having succeeded directly, through Pearson, who 
was too much distrusted by America, Britain has none 
the less succeeded indirectly, through Deterding, in 
controlling the entrance to the Panama Canal. 

It is a strange fact that, while the United States 
were watching the activities of the Pearson group 
with evident hostility, they displayed not the least 
mistrust of the Royal Dutch-Shell. By a bold and 
masterly policy, the latter obtained a footing in the 
very heart of the territory of the Standard Oil. 
American law, unlike French, does not distinguish 
between ownership of land and ownership of the min- 
erals. As in Mexico before 1917, both belong to 
the owner of the surface. The Royal Dutch-Shell 
bought land, sank wells, and was thus able to exploit 
oil as it pleased. Cleverly following the example 
of the Royal Dutch, the Shell endeavoured to place 
its shares with the American people, so as to give 
them an interest in its prosperity. It was not diffi- 
cult, considering its high dividends. In 1919 the 
Shell placed 750,000 shares upon the New York mar- 
ket; by so doing, it realized a premium of £4,390,- 
623, of which £4,000,000 were appropriated to re- 
serve and to amortization. The source of its capital 
did it no harm, for, before the War, all American 
large-scale industries had had to make calls upon 



A STATE-SUBSIDIZED COMPANY 131 

European savings. And if the Shell was British, the 
Royal Dutch was without a considerable German ele- 
ment, although officially a Dutch company. Deter- 
ding had not yet openly joined forces with Great 
Britain. He was hesitating. Foreseeing the immi- 
nent outbreak of the world conflict, he was much too 
clever to bind himself before he knew who would win. 
These two companies, connected since 1907, but 
each keeping its separate financial organization (at 
the same time reserving for each other a 40 per cent, 
share in any new subsidiary company), were thus 
freely allowed to install their reservoirs and pipe- 
lines beside those of the Standard. Besides, the 
Democrats, fearful of the political and commercial 
power of the American trusts, were not sorry to set 
against them competitors who could have no influ- 
ence upon the domestic politics of the United States. 
They came to be looked upon as international un- 
dertakings without any political ends. To complete 
the illusion the British Government, which assisted 
them in secret, simulated fear of their excessive 

growth. 

• •••••• 

The British Admiralty declared that it was impor- 
tant to free the Royal Navy from the tutelage of the 
trusts. It was voted the money required to obtain 
an interest in the operations of the Burmah Oil, thus 
ensuring for itself a share of the oil of Burmah; and 



132 THE WORLD-STRUGGLE FOR OIL 

in May 1914 it bought half the shares of the Anglo- 
Persian Oil, which holds a thirty-years' monopoly 
for the exploitation of oil deposits in Persia, except- 
ing only the five northern provinces. For Persian 
territory on the borders of the Caspian Sea was al- 
ways reserved for Russian influence. 

The Anglo-Persian began obscurely. Its inception, 
in 1909, passed unnoticed. It was founded, without 
an appeal to the public to subscribe its capital, by the 
Burmah Oil, a company at that time better known in 
Scotland than on the London Stock Exchange. Its 
first object was to take over the concessions which the 
Australian, d'Arcy, had obtained in 1901, and which 
covered the enormous area of 500,000 square miles. 
D'Arcy had obtained these concessions from the Per- 
sian Government for the infinitesimal sum of 200,- 
000 francs, of which 100,000 francs only were paid 
in cash and the rest in shares. The Persian Govern- 
ment was to receive 16 per cent, of whatever profit 
d'Arcy might make. It was much disappointed, for 
the first investigations along the Turko-Persian fron- 
tier were really discouraging. D'Arcy spent five mil- 
lion francs in vain, and he was thinking of abandon- 
ing the whole affair when he heard of oozings and 
gushings in the Shustar region, 140 miles north of 
Mohammerah, to the north of the Persian Gulf. 
D'Arcy recognized the presence of oil, but had to 
face the construction of a pipe-line and refinery, and 



A STATE-SUBSIDIZED COMPANY 133 

to find new capital for these purposes. Certain 
foreign capitalists made him tempting offers, but 
D'Arcy, who had found a staunch supporter in Ad- 
miral Fisher, the reorganizer of the British Navy in 
the twentieth century, resolved that the Persian con- 
cessions should remain under British control. He 
obtained the financial assistance of the Burmah Oil, 
and the latter founded the Anglo-Persian in 1909. 
The Royal Navy had already 150 ships burning oil. 
Pretyman, a Lord of the Admiralty, got Lord Strath- 
cona appointed to the chairmanship of the Anglo- 
Persian, the first results of which were encouraging, 
so that the British Government could direct its fu- 
ture. The capital of the new company was very 
quickly used up. It constructed a pipe-line 145 miles 
long to bring its oil to the Persian Gulf, and a re- 
finery on the island of Abadan which cost a great deal. 
But as the prospecting then taking place revealed the 
existence in Persia of rich deposits, a commission of 
geological experts, presided over by a rear-admiral, 
was sent to the spot by Winston Churphill, then First 
Lord of the Admiralty, to make an inquiry. On the 
conclusions embodied in its report, the British Gov- 
ernment decided to take control of the business. In 
the month of May 1914 the Anglo-Persian made a 
somewhat stormy entrance into history, for up to 
then very little had been heard of it: the negotiations 
and then the contract with the Admiralty had been 



134 THE WORLD-STRUGGLE FOR OIL 

conducted with the greatest secrecy. Parliament 
showed great surprise when Winston Churchill placed 
the matter before it, and asked for its sanction to 
the agreements which had been made. It was even 
necessary for Sir Edward Grey to come to the rescue 
in order to win a majority in the House. 

The Government had a certain majority of two 
thousand votes by the purchase of £2,200,000 of 
new ordinary shares. This amount has since been 
more than doubled, for on March 6, 1921 the Gov- 
ernment announced in the House of Commons that 
it held £5,200,000 ordinary shares, £1,000 prefer- 
ence shares, and £199,000 debentures. Two-thirds- 
of the ordinary shares of the Anglo-Persian are to- 
day in the hands of the British Government, the other 
third is held by the Burmah Oil, which is directed 
by the Admiralty. Thus absolute Government con- 
trol is assured. 

The Anglo-Persian has become literally a State- 
directed company, but British officials are wise 
enough to entrust to technical experts the actual 
management of the undertaking. This explains its 
great success. Two trustees. Lord Inchcape and Sir 
E. H. Packe, represent the Government on the Board 
of Directors: they have the right of absolute veto 
upon all decisions. 

Finally, the Government has made a contract with 
the Anglo-Persian for the supply of important quanti- 



A STATE-SUBSIDIZED COMPANY 135 
ties of oil at an advantageous price for a certain num- 
ber of years. The needs of the Navy are thus guar- 
anteed for a period of years. There is no surprise 
to be feared, for the oil-fields are near the Persian 
Gulf, where Great Britain reigns as mistress, and 
where no foreign ship can enter without her permis- 
sion. It is, moreover, an important strategic point; 
ships can be dispatched from there to all parts of 
the world where Great Britain has interests — Suez, 
Gibraltar, India, Australia, Africa. 

The oil-deposits of Persia are so rich that it will 
soon be necessary to increase tenfold the projected 
development of the equipment, pipe-lines, and refin- 
eries, to deal with future production. Even in our 
time the natives collect the oil by rudimentary proc- 
esses and transport it on the backs of camels to the 
markets of the interior, where it serves as an object 
of exchange. Persia is one of the few countries in 
which numerous spontaneous springs and seepages re- 
veal the existence of oil. In certain valleys it flows 
along the slopes and pours into the rivers, making the 
water unfit for consumption. The Anglo-Persian al- 
ready ranks among the chief oil-producing compa- 
nies of the world. It is precisely this success, we 
may believe, which has caused so much apprehension 
in the United States on the subject of the rivalry be- 
tween British and American producing companies. 
The Anglo-Persian controls an almost unlimited pro- 



136 THE WORLD-STRUGGLE FOR OIL 

duction in Persia, and as soon as there are enough 
pipe-lines and reservoirs, the output will increase in 
enormous proportions. From 1923 onward, the 
Anglo-Persian, by itself, will be in a position to sup- 
ply a large proportion of the needs of Great Britain. 
It will then be free of the contract which, for more 
than seven years, has bound it to the Royal Dutch- 
Shell, obliging it to dispose of a considerable por- 
tion of its production through the latter company. 

When its program is completed, the Anglo-Persian 
will possess a fleet, the capacity of which will ex- 
ceed a million tons. Expenses are small, because of 
the great productivity of the wells, which gives to 
Persia a marked superiority over all the other oil- 
fields of the world, except perhaps Mexico. Its 
yield of benzine and kerosene is much superior to 
that of most of the oil-fields of the United States; it 
is richer than that of Mexico. 

But for several years, the Anglo-Persian has no 
longer been content with Persia, rich as it is. Its 
ambitions now extend to the whole world. It is in 
process of installing its depots in all the great ports 
of the world. In French territory alone, reservoirs 
will be constructed in the ports of Dunkirk, Le Havre, 
Rouen, Saint-Nazaire, La Pallice, Bordeaux, Mar- 
seilles, Bizerta, Algiers, Oran, Casablanca, Dakar. 
Thiough the agency of its subsidiary, the d'Arcy Ex- 
ploration, it is prospecting for oil in every part of 



A STATE-SUBSIDIZED COMPANY 137 
the globe. Wherever geological conditions appear 
to indicate the presence of oil in commercial quan- 
tities, the operations of drilling are undertaken. 
The activities of the d'Arcy Exploration are carried 
on at present in Great Britain, Australia, New Zea- 
land, Canada, Hungary; and again, quite recently, 
the company has concluded arrangements for inves- 
tigating and prospecting in districts of France and 
her colonies which are likely to produce oil. A 
French company, the Société Générale des Huiles de 
Pétrole, has been founded, with an initial capital of 
100 million francs, jointly subscribed by French and 
British groups, with the object of undertaking the re- 
fining and distribution of oil in France as well as 
her colonies. According to the agreement signed in 
London on October 27, 1920, by Sir Basil Zaharoff 
for the Banque de la Seine, nine subsidiary compa- 
nies will be founded, each having a different func- 
tion: importation, refining, distribution, and trans- 
port of oil.^ And this "Franco-British Anglo- 
Persian" is even going to build an oil fleet, thanks to 
the Société Navale de l'Ouest, 

Other enterprises are also under consideration. 

1 The Anglo-Persian will subscribe 45 per cent., France 55 per 
cent, of the capital of each of these companies. The Agreement of 
October 27, 1920, was the occasion of very sharp attacks from certain 
short-sighted members of the House of Commons, who did not un- 
derstand that the British Government was about to lay hands, in 
concert with the Royal Dutch, upon the oil wealth of France, and 
reproached the Government with dispersing its efforts. 



138 THE WORLD-STRUGGLE FOR OIL 

The Anglo-Persian Oil has acquired important in- 
terests in the British Oil Bunkering, and it has also 
founded the Tankers Insurance Company Limited, 
an insurance company with a capital of £100,000, 
for it intends, henceforward, to do its own insurance. 
By means of the Scottish American Oil, of which it 
has technical and commercial control, it has even suc- 
ceeded in penetrating into Mexico, thus completing the 
work begun by Pearson and continued by the Shell, 

Its activities, during the month of December 1920 
alone, were remarkable. It obtained a footing in 
Spain, founding a company with a capital of 25 mil- 
lion pesetas, of which 55 per cent, was subscribed 
by the Anglo-Persian and 45 per cent, by a Spanish 
group having at its head the Banco Urquijo and the 
Spanish Credit Bank. It concluded a contract with 
the Hungarian Government guaranteeing it exclu- 
sive rights of exploitation on Magyar territory, in 
case oil should be discovered there, which has hap- 
pened. Deposits have been found near Letenye and 
the quantities which it is hoped to obtain will no 
doubt be more than sufficient to supply the needs of 
Hungary. 

The Hungarian Minister of Finance submitted to 
the National Assembly, in December 1920, a report 
concerning the cession of rights to prospect for oil to 
a syndicate controlled by the d'Arcy Exploration, 
The Government at Budapest, not having the neces- 



A STATÈ-SUBSIDIZED COMPANY 139 
sary capital for exploration, was favourably dis- 
posed to the offers of the subsidiary of the Anglo- 
Persian, The negotiations were conducted by Dr. 
Telesky, a former Minister of Finance, and Dr. von 
Bockh, Secretary of State. According to the agree- 
ment reached, the (TArcy Exploration undertook to 
devote at least £100,000 to prospecting for oil; if 
the -results were satisfactory, the company would ex- 
ploit one-third of the geological productive units, 
one-third would be kept in reserve, and the remain- 
ing third would revert, free of all expense, to the 
State. As regards the second portion, the Hunga- 
rian Government reserved complete freedom of ac- 
tion. A company was formed with a capital of £1,- 
000,000 sterling, of which the Hungarian Govern- 
ment subscribed ten per cent.; the company had to 
deposit with the Government 25 per cent, of the 
shares, and to undertake to hand over to it each year 
one-tenth of the production, in kind or in money. 

The Anglo-Persian has also obtained possession 
of the oil-bearing territory of Transylvania, ceded to 
Rumania. During the War, this was seized and ex- 
ploited by the Austrian military authorities, for it 
belonged to the Hungarian National Petroleum Com- 
pany. The capital of this company was heavily 
drawn upon for repairs undertaken at the close of 
hostilities. An appeal for funds became necessary. 
The Anglo-Persian demanded that the technical and 



140 THE WORLD- STRUGGLE FOR OIL 
commercial management of the undertaking should 
be entrusted to it and that two of its nominees should 
sit on the Board of Directors; it then subscribed 
£500,000 in preference shares. Each of these shares 
carried twenty votes against one for an ordinary 
share: thus the Anglo-Persian has complete 
control. 

In addition to this, it has taken over the share 
which was reserved for Britain in the German inter- 
est in the Steaua Romana, and disposes of nearly 80 
per cent, of the shares in the Turkish Petroleum, 
which has claims to oil concessions in Mesopotamia. 

On October 13, 1921, the Anglo-Persian made an 
agreement with the Japanese company Tei-Koku, 
undertaking to supply it with 350,000 barrels of pe- 
troleum yearly. Half of this is destined for the 
Japanese Navy. 

Organizations for the sale of its products are to be 
found in Belgium, Denmark and Norway. 

Part of the famous deposits of Rivadavia, which 
the Argentine Government intended to reserve for 
itself, has fallen under its control. 

In co-operation with the Australian Government — 
from which it had already obtained, in May 1920, 
exclusive rights in the former German colonies of 
Papua — the Anglo-Persian founded the Common- 
wealth Oil Refineries, with a capital of £500,000. 
It is prospecting actively in Western Australia, and 



A STATE-SUBSIDIZED COMPANY 141 
has asked the Government of Perth for a concession 
of 100,000 acres. 

In New Zealand it has offered to subscribe 50 per 
cent, towards the formation of a capital of £100,000 
for prospecting purposes. 

And the Anglo-Persian is, at the present moment, 
building vast works in New Brunswick, for the dis- 
tillation of oil from shale. The oil produced will 
be used for heating the boilers of British ships. The 
oil-bearing lands in this region are rich and exten- 
sive, and the shale of which it is composed has been 
found twice as rich in oil as the Scottish shale, the 
first from which the precious "rock-oil" was distilled.^ 
As in Wyoming, Colorado and Utah, there are enor- 
mous laminate rocks, stretching in beds below the 
valleys, of a thickness of eight to ten metres; when 
distilled they may produce up to 240 litres of oil to 
the ton. When the Mormons, fleeing from persecu- 
tion in 1846, took refuge in the Far West and dis- 
covered these oil shales, they never suspected the 
service they would render half a century later to 
the British and American Navies.^ They found 

^The Scottish factories treat three million tons of shale annually, 
from which the average yield is only 122.5 litres of oil to the ton, 
half the yield of the Canadian and American rocks. Apart from 
this bituminous shale, it seems unlikely that Great Britain, which 
controls 90 per cent, of the future production of the globe, would 
have succeeded in finding oil-deposits in her own soil. 

2 Anticipating the time when the oil-fields of the United States 
will be exhausted, the American Government has taken possession 



142 THE WORLD- STRUGGLE FOR OIL 

themselves held up in their march across the desert 
for want of fuel, but one of their leaders announced 
that Providence would soon supply their needs. The 
prophecy came true that very day: a Mormon was 
surprised to notice that the stones on which he placed 
his saucepan took fire. Since then, hunters and 
prospectors venturing into these desolate regions use 
no other fuel than these rocks. 

of millions of hectares of land containing bituminous rock, in order 
to ensure the fuelling of its Navy. 



CHAPTER XII 
AN AMERICAN BALKANISM 
The British Controlled Oilfields 

The Anglo-Persian Oil is no longer sufficient for 
Great Britain, which founded a new company in 
1918, the British Controlled Oilfields, specially com- 
missioned to fight the Standard Oil. Established 
under Canadian law with an initial capital of 
£12,000,000, increased later to £40,000,000, and 
capable of a further increase up to £159,000,000, 
the British Controlled Oilfields will be one of the 
greatest financial powers of the world. Like the 
Anglo-Persian, it is entirely in the hands of the 
British Government under the system of the voting 
trust. It seems that an immense tract of oil-bearing 
territory exists from Mexico to the Argentine, a con- 
tinuation of that of the United States. Already 
Mexico has become the second greatest producing 
State in the world; and oil has been found in almost 
all the South American States, even in Brazil and 
on the plateaux of Bolivia. Of these immense de- 
posits the British Controlled Oilfields wishes to gain 

143 



144 THE WORLD-STRUGGLE FOR OIL 
possession on behalf of the British Government, thus 
completing the work of the Royal Dutch-Shell in 
Venezuela and in the neighbourhood of the Panama 
Canal. It possesses properties of very great value 
from Mexico to Brazil, in Trinidad, Venezuela and 
Costa Rica. In 1920 it began operations in Ecuador, 
and it is at present prospecting in Brazil, in the State 
of Bahia, where bituminous seepages and traces of as- 
phalt abound. Its concessions actually surround 
two-thirds of the Caribbean Sea: they are situated in 
the States of Guatemala, Honduras, Nicaragua, 
Costa Rica, Panama, British Guiana, Colombia, 
Venezuela, Peru, Ecuador, and the island of Trini- 
dad. The concessions of the British Controlled Oil- 
fields are nearly always on the sea coast — or rather 
in close proximity to the sea — ^which is a consider- 
able advantage. It has expressly chosen them, on 
both the Atlantic and the Pacific, as a precaution 
in case war should break out between Britain and the 
United States; for, even with the help of the Japa- 
nese fleet, the British Navy might not be able to seize 
the Panama Canal. And its units must be in a posi- 
tion to replenish their stores of fuel without being 
obliged to make a long detour round the Magellan 
Straits. 

The British Controlled Oilfields is at present ne- 
gotiating for the control of important concessions in 
Panama and Nicaragua. It controls all those of 



AN AMERICAN BALKANISM 145 
British Guiana, nearly all those of Honduras, but I 
fear it is about to lose those it had in Costa Rica. In 
order to obtain them, Great Britain did not hesitate 
to foment revolution in this little Republic. Unable 
to obtain anything from the established Govern- 
ment, it helped to place in power the revolutionary 
President Tinoco, from whom it got all it wanted: 
more than 6,000 square miles granted to the British 
Controlled Oilfields, Unfortunately Tinoco has 
been overthrown: the regular Government, restored 
to power, hastened to annul these concessions. Great 
Britain, to compel it to ratify these concessions, 
stirred up a war between Costa Rica and Panama, 
while she sent the cruiser Cambrian to the coast of 
Costa Rica in order to increase the pressure. Events 
went against her. Costa Rican troops invaded Pan- 
ama. A landing took place on February 28, 1921, 
on the Pacific coast, south of the Dulce Gulf, the 
eastern shore of which is common to both countries, 
and another less important one on the Atlantic, 
towards Bocas del Toro. Panama lost the territory 
of Goto. 

Mr. Alves, Chairman of the British Controlled Oil- 
fields, set out in March 1921 for Costa Rica, to study 
the question at issue. But the United States stepped 
in; and Judge White, as arbitrator, pronoimced in 
favour of Costa Rica. On August 26, 1921, an 
American naval detachment assisted the Costa Rican 



146 THE WORLD-STRUGGLE FOR OIL 
forces to take definite possession of the contested 
territory, in spite of the indignant protests of the 
Government of Panama against the violent measures 
of which it was the victim. 

There is continual warfare among the little re- 
publics of Central America. The imbroglio of 
British and American affairs around the Gulf of 
Mexico and the Caribbean Sea {British Controlled 
Oilfields, Mexican Eagle, Royal Dutch, Shell, Mexi- 
can Petroleum, Standard Oil) makes this region 
the Balkans of the oil world. 

The British Controlled Oilfields, the board of 
which includes a British admiral and a Member of 
Parliament, is the result of long investigations pur- 
sued by Lord Fisher on behalf of the Admiralty. 
The results of these studies are being methodically 
turned to account in order to ensure to Great Britain 
the supremacy of the sea by means of the supremacy 
of oil. 



CHAPTER XIII 

POLITICAL TENDENCIES OF 
THE ROYAL DUTCH 

The British Oil Empire 

Until 1914, the British Government seemed to re- 
sist the formidable extension of the Royal Dutch 
throughout the world. Under the pretext of ensur- 
ing reserves for itself, it got possession of outlets 
which this company had not yet touched, taking con- 
trol of the Anglo-Persian and in 1918 founding the 
British Controlled Oilfields, The reason was that 
they were not yet allied. But since the War an 
event of considerable importance has taken place: 
Deterding has thrown in the fortunes of his trust 
with those of the greatest empire in the world, the 
British Empire, whose policy at present dominates 
the world. 

At the beginning of its history, the Royal Dutch 
was a Dutch company. If the Royal Dutch became 
British by its union with the Shell, it was German 
through its Rumanian share in the Deutsche Petro- 
leum, which united the petroleum interests of the 

147 



148 THE WORLD-STRUGGLE FOR OIL 

Deutsche Bank, Steaua, European Petroleum, and 
the Deutsche Mineratal Industrie, The first impor- 
tant capital of this powerful consortium was fur- 
nished by German banks: the Deutsche Bank, the 
Disconto Gesellschaft, and the firm of Bleichroder 
are, as it were, the fundamental tripod supporting 
the edifice. It has been justly said that if Germany 
had not the most important place in the Royal Dutch, 
it is because Mr. Deterding was more concerned with 
British interests. He uses the power of nations as 
he uses money. Great Britain being mistress of the 
seas, he has given to British capital the most im- 
portant part in his undertakings. But the Roths- 
child family is international. There are branches 
in London, Paris, Berlin, and Vienna. Mr. Deter- 
ding had safe places to anchor while waiting for the 
wind. During the retreat of the Rumanian army, 
the wells controlled by the Royal Dutch were partly 
destroyed. Whether this destruction was the work 
of Rumanian or of German soldiers is not important. 
The Deutsche Bank was associated with Mr. Deterding 
in Rumania. Whatever was the result of the War, 
the Royal Dutch-Shell had to be compensated. . . . 
It would have been just the same as far as Bag- 
dad. If Germany had gained Asia Minor, the prop- 
erty of the Royal Dutch would still have been saved 
by the Deutsche Bank, As the Allies have the upper 
hand, Mr. Deterding has nothing to fear. He is in 



POLITICAL TENDENCIES 149 

close touch with France and Britain. He is in oppo- 
sition only to America. And this coalition of the 
oil powers is a very curious one, in which enemy 
nations agree at certain times and disagree at others, 
all of them being led by a superior power to un- 
suspected ends, just as they were in the world race 
for armaments. An important fact which may puz- 
zle the simple-minded, is that, during the War, Mr. 
Deterding made his flag respected. 

His cleverness was such that, whichever side was 
victorioius, he was bound to come out unscathed 
from the conflict. 

Since Great Britain has conquered Germany, he 
has thrown in his fortunes with hers. 

It was a master-stroke for British policy. Allied 
to this powerful trust. Great Britain now possesses 
an oil empire extending throughout the world: — 

Europe 

Russia Royal Dutch-Shell 

Rumania Royal Dutch-Shell 

Hungary Anglo-Persian 

Jugo-Slavia Royal Dutch-Shell 

Albania Anglo-Persian 

America 

Newfoundland Anglo-Persian 

New Brunswick Anglo-Persian 

California Royal Dutch-Shell 

Oklahoma Royal Dutch-Shell 



150 THE WORLD-STRUGGLE FOR OIL 

America (Continued) 

Texas, Louisiana Royal Dutch-Shell 

Mexico Royal Dutch-Shell (Mexican 

Eagle) 

Central America British Controlled Oilfields 

Trinidad Royal Dutch-Shell 

Venezuela Royal Dutch-Shell 

Guiana British Controlled Oilfields 

Brazil British Controlled Oilfields 

Colombia British Controlled Oilfields 

Ecuador British Controlled Oilfields 

Argentine Anglo-Persian 

Asia 

Caucasus Royal Dutch^Shell 

Persia Anglo-Persian 

Mesopotamia Turkish Petroleum 

India Burmah Oil 

Dutch Indies Royal Dutch-Shell 

Straits Settlements Royal Dutch^Shell 

China Royal Dutch-Shell 

Oceania 

Australia Anglo-Persian 

New Zealand Anglo-Persian 

Papua Anglo-Persian 

Africa 

Egypt Royal Dutch-Shell 

Madagascar Royal Dutch-Shell 

South Africa Royal Dutch-Shell 

Morocco Anglo-Persian 



CHAPTER XIV 

HOW THE UNITED STATES LOST 
SUPREMACY OVER OIL 

The Americans themselves realize that they are 
about to lose their supremacy over oil. "While we 
were basking in a false security, lulled by the knowl- 
edge of our resources," the American Nation wrote 
recently, "foreign companies silently and ener- 
getically took possession of the unexploited oil- 
fields." The Mexican Eagle, a British company, 
received vast concessions in Mexico. The Shell, 
another British group, established itself in many 
places. The Royal Dutch, which, in appearance at 
least, was originally a Dutch company, was founded 
to exploit the oil of the East Indies. Later, a fusion 
of the Royal Dutch and the Shell took place, and 
the Mexican Eagle sheltered under the wings of the 
new company. The Anglo-Persian was created to 
exploit Persia and the East, and the British Govern- 
ment subscribed £2,000,000, reserving the control 
for itself in order to supply the needs of the navy/ 

^ This amount has since been more than doubled. 

161 



152 THE WORLD-STRUGGLE FOR OIL 

This company was for years closely connected with 
the Royal Dutch} This gigantic aggregation of 
British interests, at the present time, owns or controls 
a great part of the oil of California, Oklahoma, 
Louisiana, Mexico, Trinidad, Venezuela, Colombia, 
Rumania, Russia, Persia, Egypt, India, and the East 
Indies. Except in North America, many of the con- 
cessions are so vast that they exclude American com- 
panies from the most profitable oil-fields. How- 
ever, adds the Nation, the experts of the United States 
Geological Survey were making disturbing discover- 
ies that 40 per cent, of American oil was exhausted, 
and that, at the present rate of production, the ex- 
ploitation would be complete in fifteen or twenty 
years, for home requirements were becoming so 
great that more oil would have to be imported than 
was being exported. In 1920, the imports exceeded 
the exports by 100 million barrels. And British 
companies, closely connected with the British Gov- 
ernment, are now in exclusive possession of 90 to 97 
per cent, of the future world production. What a 
change in the situation! 

Ten years ago, Britain possessed no oil, to-day she 
is independent, to-morrow she will be mistress. The 
feat has been accomplished by the silent efforts of 
a few men such as Sir Marcus Samuel, chairman of 
the Shell, Lord Cowdray (Pearson), Lord Curzon, 

1 By the contract already mentioned which expired in 1922. 



HOW THE UNITED STATES LOST 153 

formerly Viceroy of India, Sir John Cadman, tech- 
nical adviser to the British Government, Professor in 
the University of Birmingham, and Chairman of the 
Inter-Allied Petroleum Conference during the War, 
Lord Strathcona, creator of the Canadian railways, 
who played a great part in the Anglo-Persian, and, 
above all. Admiral Lord Fisher. 

These men acted even without the knowledge of 
the British people and its parliamentary representa- 
tives. Their fellow-countrymen and their oppo- 
nents only heard of their activities when they had 
endowed their country with a world-wide oil 
empire. 

There was veritable amazement in the House of 
Commons when it was informed of what Lord Fisher 
and Lord Strathcona had done with the Anglo- 
Persian. Their work narrowly escaped undoing. 
Lord Fisher himself described, in September 1919, 
the opposition he met with, even among his col- 
leagues. "I was dubbed 'an oil maniac' when I 
was at the Admiralty in 1885. Lord Ripon, the 
First Lord, sent for me and told me I was called a 
Radical enthusiast and nicknamed 'Gambetta,' and 
said he meant to make me a member of the Board 
of Admiralty. I told him all the rest of the Board 
would leave. He saw me a week after and confessed 
it was so; but, thank God! I was spared to be Direc- 
tor of Naval Ordnance instead." 



154 THE WORLD-STRUGGLE FOR OIL 

Lord Fisher experienced the same difficulties when 
he wished to equip the British Navy with sub- 
marines. It is to him, and to the Bethlehem Steel 
Works (United States), that the Allies owed the 
prompt completion of the special type of submarines 
which "went, unconvoyed from America to the Dar- 
danelles and acted there prodigiously." A few of 
these submarines which succeeded in passing through 
the wire nets of Chanak-Nagara, for a long time con- 
trolled the Sea of Marmora and prevented the Turks 
from taking supplies by sea to their fortifications on 
the Straits. Oil supremacy and naval supremacy 
go hand-in-hand. When he wished to give his 
country empire over oil. Lord Fisher's principal ob- 
ject was to preserve her dominion over the seas. 
For that fleet will be victorious which has at its dis- 
posal the most abundant sources of oil. Ships using 
oil have driven out those burning coal, just as the 
latter replaced sailing ships. 

When we compare the results obtained by France 
and by Britain, on whose soil it seems that no de- 
posits of mineral oil have yet been discovered (a fact 
which rendered Lord Fisher's task none the easier) ; 
and when we see Britain mistress of nearly all the 
oil remaining in the world, we stand confounded with 
admiration before the genius of those to whom she 
owes such an empire. 



HOW THE UNITED STATES LOST 155 

British Oil Policy 

Having been obliged to allow the first place to 
America, the country which first discovered oil, and 
which until recently produced 70 per cent, of the 
world's output. Great Britain began to gain upon her 
by keeping command of oil-carrying ships. Who- 
ever transports a commodity controls it, and is master 
of it up to a certain point, for he is the indispensable 
intermediary for those who wish to obtain it. 
Should any difficulty arise, the transporter, accord- 
ing as he fulfils his office or not, grants or withholds 
supplies for the markets, as he pleases. The British 
genius has always sought to compensate, by mari- 
time superiority, for the inferiority of Great Britain 
in certain respects. If the United States occupied 
the first place among producers of oil, they ranked 
second to Great Britain as transporters. Great 
Britain, understanding that oil "is destined to play 
the same part in the world as coal, cotton or steel," 
made a special point of retaining control of oil- 
carrying ships. It was a thrilling duel. 

The world tonnage of tank-steamers rose by June 
30, 1919, to 2,616,000, tons, of which 1,500,000 tons 
sailed under the British flag, 1,000,000 tons under 
the American. In June, 1920, the United States had 
gained the first position. They had 308 tank- 



156 THE WORLD-STRUGGLE FOR OIL 

Steamers, amounting to 1,734,843 tons, or 51 per 
cent, of the whole (3,386,091 tons). On January 
1, 1921, the supremacy of Great Britain was restored. 
Of the 524 oil-steamers afloat, 252 belonged to her, 
the United States having only 191. But she lost this 
position again six months later. 

Mistress of one of the foremost oil-carrying fleets, 
Britain next sought, until 1922, to monopolize almost 
all the remaining resources of the world. The 
Royal Dutch-Shell, British Controlled Oilfields, and 
Anglo-Persian Oil were valuable auxiliaries of the 
Foreign Office for this object. According to Dr. 
David White, one of the members of the American 
Geological Survey, this is ^*^hat Great Britain pos- 
sesses to-day: — 

Canada: the whole of the deposits are reserved for ™re£. 

British control 995 

Algeria, Egypt: 50 per cent 462.5 

Persia, Mesopotamia : 75 per cent : . 4,365 

S. E. Russia, S. W. Siberia, Caucasus : 50 per cent. 2,925 

Rumania, Galicia, Europe: 50 per cent 1,567.5 

New Russia and Sakhaline: 50 per cent 462.5 

Dutch Indies : 50 per cent 753.75 

India: the whole 995 

In Peru alone have the United States triumphed 
over Great Britain. The discovery of oil there is 
due to the English. But, thanks to the power of its 
capital, the Standard Oil, through the medium of the 



HOW THE UNITED STATES LOST 157 

International Petroleum Company, managed to ac- 
quire the shares of the four most important British 
companies. And the United States at present con- 
trols 70 per cent, of the output there, the British re- 
taining only 27 per cent, and Italy 3 per cent. The 
Peruvian production, however, is not very high; it 
does not yet reach 3 million barrels. 

The need for oil has grown so great that the de- 
posits containing this precious liquid fuel are 
greedily coveted by the various governments which 
take shelter behind financial groups. There is a 
shortage of 250 million tons of coal on this planet, 
and it produces only 98 million tons of oil. But no 
Government can boast, in this matter, of having 
shown a foresight equal to that of Great Britain. 

The British Government is no longer content to- 
day to encourage, favour and defend its own na- 
tionals. Better than this, it makes conquests or es- 
tablishes protectorates having as essential object the 
reservation exclusively for its nationals of new oil- 
bearing territories, such as Persia and Mesopotamia. 
The treaty recently imposed on Persia was nothing 
but a disguised protectorate. Fortunately for Brit- 
ain, the Soviet Government has voluntarily given up 
its advance into that country since it concluded a 
trade agreement with London. And it is sufficient 
to read the Treaty of Sèvres to see the underlying 
motives of the British negotiators: the desire to mo- 



158 THE WORLD-STRUGGLE FOR OIL 

nopolize the oil of Asia, and anxiety to keep out the 
United States, all the oil-fields left to France being 
in particular granted to her with the idea of a future 
British participation. 

The British Government is so jealous of its posi- 
tion in Mesopotamia that it will not even tolerate 
American prospectors there, and certain incidents 
have happened in connection with which the disap- 
pointed Yankees have asked the State Department 
at Washington to demand satisfaction. 

The British oil policy is not uniform. Some- 
times, when it seems possible, she gets possession of 
proved oil-fields. Sometimes, in the case of a 
country which would hold its own, she negotiates 
for an advantageous share in the profits — this is 
what happened with France by the San Remo Agree- 
ment — or she makes contracts ensuring abundant 
supplies of the precious mineral oil. 

When a State does not fall in with her views suf- 
ficiently quickly, Britain does not recoil from any 
means of pressure. This is what led Admiral De- 
gouy, in April 1920, to write: "As a corollary to 
well-known negotiations with one of the richest coun- 
tries in oil in the Near East, the British Admiralty 
has organized and is maintaining on the Danube a 
. numerous flotilla of gunboats and river monitors." 
The reason is easy to guess. 

From 1918 to 1920 an unofficial squadron of 



HOW THE UNITED STATES LOST 159 

small Russian steamers, requisitioned and armed by 
Great Britain, dominated the Caspian Sea, so tha 
Batum, the port of embarkation for oil on the Blacl 
Sea, and Baku, its place of production, were botl: 
in the hands of the British. They disposed of the pe- 
troleum and mazut there at their own pleasure, per- 
mitting no control over their purchases. Britain 
first took as much as she could; it was only after- 
wards that she allowed France to replenish her stores 
in turn, provided there was any petroleum left.^ 

Thus ends the work of Lord Fisher, who applied 
himself for more than thirty years to the problems of 
oil. Thus end the experiments and observations con- 
ducted modestly and quietly for so long at Ports- 
mouth. 

Henceforward the British Navy is sure of its sup- 
plies of oil for a century. But the position is such 
that the United States can avoid war only at the price 
of industrial servitude. 

HeMMING-IN of THE UNITED StATES 

While Great Britain was pouncing upon nearly all 
the oil remaining in the world, the United States 
basked in a false security. Had they not supplied 
80 per cent, of the needs of the Allies during the 
War? It is true that if the War had continued the 
United States would not have been able to satisfy 

1 Revue Universelle, October 15, 1920. 



160 THE WORLD-STRUGGLE FOR OIL 
those needs. "In September and October 1918," de- 
clared Mr. Deen, who played such an important part 
in the alliance of the Royal Dutch with the Shell and 
who now directs the oil industry «of Oklahoma, "the 
Allies were taking each day 194,000 barrels of pet- 
rol, while the average daily output was 191,000. 
Adding together the consignments sent to Europe by 
Mexico and the United States, we reach the figure of 
1,200,000 barrels a day, while the United States 
was producing only 960,000 and Mexico 140,000. 
The daily deficit was thus 300,000 barrels." 

The United States sacrificed themselves in the 
cause of the Allies during the War.^ Great Britain 
has shown no gratitude. They had already reached 
the point at which they could not supply their home 
consumption, since 25 per cent, of the petroleum con- 
sumed in the States used to come from Mexico, and 
they sent the Allies more than their own production. 
The War contributed not a little to placing them in 
their present position. 

According to Walter Teagle, the new chairman of 
the Standard Oil, if their consumption continues to 
increase at the present rate they will consume, in a 
few years, 630 million barrels, or double what they 
produced in 1919. Since 1914 alone the number of 
motor-cars in the United States has increased from 
1 They did not sacrifice themselves for nothing! 



HOW THE UNITED STATES LOST 161 
1,700,000 to 8,000,000 (Ford cars swarm there). 
These alone absorb 85 per cent, of the national out- 
put, leaving only 15 per cent, for the railways, ship- 
ping, manufactures and export. 

The American companies have made a great ef- 
fort. They have speeded up production, raising, it 
from 376 million barrels in 1919 to 443 million in 
1920. New exploratory work has been carried on, 
especially in Texas and Kansas. But will not this 
hasten yet more the time when the resources of the 
United States will be exhausted? 

At the word of command from the United States 
Government, "Draw more and more on the oil in 
foreign countries," the Standard sent out prospectors 
all over the world. But everywhere they ran up 
against an unforeseen obstacle. An American pros- 
pector had the misfortune to appear on the shores of 
the Dead Sea in October 1919. Without hesitation 
the British General who was Governor of Palestine 
had him arrested in Jerusalem. To the indignant 
protests of President Wilson Britain simply replied 
that it was not a question of measures aimed specially 
against the Americans, but that all prospecting in 
Palestine was forbidden until a new order. The 
same thing happened in Mesopotamia. 

Everywhere in the world, except possibly Canada, 
in which country they have considerable influence on 



162 THE WORLD-STRUGGLE FOR OIL 
account of their geographical proximity, the Amer- 
icans for two years found the "closed door." ^ Gen- 
erally they were either completely excluded from oil- 
bearing concessions situated in the territory, the col- 
onies, or even the sphere of influence of Great Brit- 
ain, Japan and the Netherlands; or else they were 
authorized to establish themselves only under such 
conditions that they would lose the effective control 
of their undertakings. Foreigners are forbidden to 
prospect for oil in Burma, India, Persia, Uganda 
and the United Kingdom. A policy which excludes 
foreigners from the control of petroleum products 
is followed in Algeria, Australia, Barbados, Kenya 
Colony, British Guiana, France, French West Africa, 
Guatemala, Japan, Formosa, Saghalien, Madagas- 
car, Mexico, New Guinea, and probably in the Union 
of South Africa. Venezuela and Uganda are con- 
sidering a similar policy. 

The right to exploit mineral wealth cannot be 
granted to foreigners in Australia, Barbados, Kenya 
Colony, New Guinea, the Dutch Indies, France, 
French West Africa, Guatemala, India (probably), 
Great Britain, Japan (practically), Trinidad (in 
part), Venezuela, Madagascar, and, except for rights 
already acquired, in Rumania and Slovakia. Tem- 
porary restrictions have been placed on the acquisi- 

1 Report of the American Director of the Bureau of Mines, Van 
H. Manning, to the Secretary of State for the Interior. 



HOW THE UNITED STATES LOST 163 
tion of oil concessions by foreigners in two districts 
of Colombia and in the new Rumanian territory. 

The ownership of oil deposits belongs to the Gov- 
enment in Bolivia, Costa Rica, Slovakia, South Af- 
rica, Uganda, Venezuela, Great Britain, and partly 
so in the Argentine, Australia, British Guiana, Ecua- 
dor, India, Trinidad, Canada and Colombia. The 
Dominican Republic, Mexico, Rumania and Russia 
are considering the possibility of following the same 
course. But the United States have pledged them- 
selves not to recognize the new Mexican Government 
unless it renounces this measure. In France the Gov- 
ernment has regalian rights over the riches of the 
subsoil; it grants them at its discretion. 

In face of this situation. Senator Gore of Okla- 
homa, on March 10, 1920, demanded of the Federal 
Government a report upon the measures taken by for- 
eign Governments to exclude Americans from oil- 
fields. Two months later, on May 17th, President 
Wilson transmitted to the Senate the report of the 
Secretary of State. 

"The policy of the British Empire," wrote the Act- 
ing Secretary of State, Frank L. Polk, "is reported 
to be to bring about the exclusion of foreigners from 
the control of the petroleum supplies of the Empire, 
and to endeavour to secure some measure of control 
over oil properties in other countries. This policy 
appears to be developing along the following lines, 



164 THE WORLD-STRUGGLE FOR OIL 
which are directly or indirectly restrictive on citizens 
of the United States: — 

"1. By debarring foreigners and foreign nationals 
from owning or operating oil-producing properties in 
the British Isles, colonies and protectorates. 

"2. By direct participation in ownership and con- 
trol of petroleum properties. 

"3. By arrangements to prevent British oil compa- 
nies from selling their properties to foreign-owned 
or controlled companies. 

"4. By Orders in Council that prohibit the transfer 
of shares in British oil companies to other than Brit- 
ish subjects or nationals." 

These measures have led to the control of the 
Shell, by agreement with the Royal Dutch, which 
holds 60 per cent, of its shares. "It is understood 
that the British Government has a controlling interest 
in the Anglo-Persian Oil Company, and that it has 
also assisted in the development of the Papuan oil- 
fields by bearing one-half of the expense and con- 
tributing experts. . . ." All prospecting for oil in 
the United Kingdom must be authorized by the Board 
of Trade. In fact, the only borings carried out in 
the country are by 5. Pearson and Son, Ltd,, acting 
as petroleum development managers to the Govern- 
ment. In Trinidad no one may acquire oil-bearing 
land without the authorization in writing of the Gov- 
ernor, subject to the approval of the Secretary of 



HOW THE UNITED STATES LOST 165 
State for the colonies. Now the latter requires of 
every British company that not more than 25 per 
cent, of its capital is to be held by aliens and that the 
majority of the directors shall be British. 

The Polk Report goes on to prove that almost all 
other countries, even the smallest, close the door to 
Americans. Only Bolivia, Colombia and Costa Rica, 
which has recently annulled the concessions granted 
to the British Controlled Oilfields place Americans 
and their own nationals on the same footing. The 
case is different in Guatemala, in Ecuador, and, 
above all, in Mexico, "only Mexicans by birth or 
naturalization and Mexican companies have the right 
to acquire ownership in lands, waters and their ap- 
purtenances, or to obtain concessions to develop 
mines, waters, or mineral fuels in the Republic of 
Mexico. The nation may grant the same rights to for- 
eigners provided they agree before the Department 
of Foreign Affairs to be considered Mexicans in re- 
spect of such property and accordingly not to invoke 
the protection of their Governments in respect to the 
same, under penalty, in case of breach, of forfeiture 
to the nation of property so acquired. Within a zone 
of 100 kilometres (62.14 miles) from the frontiers 
and of 50 kilometres (31.07 miles) from the sea- 
coast, no foreigner shall under any conditions ac- 
quire direct ownership of lands and waters." 

Meantime the San Remo Agreement had been 



166 THE WORLD-STRUGGLE FOR OIL 
signed, by which the French Government — volunta- 
rily or no — associated itself with Great Britain in or- 
der to drive out America from the Asiatic centres of 
petroleum production, and delivered over to her the 
resources which might be discovered in the zones of 
influence reserved for France. The French Govern- 
ment was so embarrassed about this agreement that 
for three months it dared not publish it. 

When it made up its mind to do so, the publication 
aroused grave anxiety in the United States. 

The Struggle for Mesopotamia 

However, public opinion and American official 
circles followed the progress of the struggle with pas- 
sionate interest. The situation became even more 
strained in consequence of an article in Sperling^ s 
Journal by Sir Edward Mackay Edgar, which consti- 
tuted a literal defiance. Great Britain openly boasted 
of her triumph. "I should say," wrote Sir Edward, 
"that two-thirds of the oil-fields exploited in Central 
and South America are in British hands. In the 
states of Guatemala, Honduras, Nicaragua, Costa 
Rica, Panama, Colombia, Venezuela, and Ecuador, 
the great majority of the concessions are in the hands 
of British subjects and will be developed by our 
capital. 

"The Alves group {British Controlled Oilfields) 
whose properties extend two-thirds round the Carib- 



HOW THE UNITED STATES LOST 167 

bean Sea is entirely British; and the regulations con- 
trolling it ensure the absolute perpetuity of direc- 
tion in the interests of Great Britain. No citizen, no 
American group, has attained, or will ever attain, in 
Central America a position . . . like that of Mr. 
Alves. If we consider the greatest of all petroleum 
organizations, the Shell group, it possesses or controls 
undertakings in every oil-producing country of the 
world, including the United States, Russia, Mexico, 
the Dutch Indies, Rumania, Egypt, Venezuela, Trini- 
dad, India, Ceylon, the Malay States, China, Siam, 
the Straits Settlements and the Philippines. 

"No doubt we shall have to wait some years be- 
fore the benefits of this position can be reaped; but 
there is no doubt that the harvest will be magnificent. 
Before long America will be obliged to buy from 
British companies, at the rate of millions of pounds 
every year and to pay in dollars, in increasing quan- 
tities the oil she cannot do without, and which she can 
no longer obtain from her own reserves. 

"I estimate that if their consumption continues to 
increase at the present rate, in ten years the Amer- 
icans will be obliged to import 500 million barrels, 
which, at the very low price of two dollars a barrel, 
means an annual paying out of a thousand million 
dollars, of which the greater part will fall into Brit- 
ish pockets. With the exception of Mexico and a 
small part of Central America, the whole world is 



168 THE WORLD-STRUGGLE FOR OIL 
solidly barricaded against an attack in force by 
the United States, The British position is impreg- 
nable." 

One year after the peace the struggle between 
Great Britain and America reached its bitterest 
phase. The United States wished to obtain, at any 
price, part of the oil deposits of Mesopotamia and 
of the new oil-bearing territory which had just been 
discovered at Djambi in the Sunda Islands. Conse- 
quently, on November 20, 1920, Mr. Colby, Secre- 
tary of State, addressed a Note to Lord Curzon, which 
the American Press published on the 24th, in which 
he protested against the exclusion of Americans from 
Mesopotamia and claimed equality of treatment for 
all nations. 

The British Government made, at the time, only a 
vague reply to the Colby Note. The English Press 
published the complete text.^ Lord Curzon then de- 
clared that the existing British rights in Mesopotamia 
were only the confirmation of those acquired before 
the War by the Turkish Petroleum Company, the con- 
trol of which the British Government holds in common 
with the Royal Dutch, for it has bought 200,000 or- 
dinary shares in this company. But for the War 
the exploitation of the oil deposits of Mosul and 
Baghdad would long since have begun. The rights 
acquired by the French Government under the San 

1 Times, April 6, 1921, 



HOW THE UNITED STATES LOST 169 
Remo Agreement represent only the German share, 
and they were granted in return for facilities given 
for the dispatch to the Mediterranean of the petro- 
leum produced. Neither the rights of the Turkish 
Petroleum Company, nor the San Remo Agreement 
will preclude the Arab State of Iraq from enjoying 
the full benefit of ownership or from prescribing the 
conditions upon which the oil-fields shall be devel- 
oped. The British Government has no desire what- 
ever to deny the United States a share in the expan- 
sion of the petroleum industry of Mesopotamia. And 
the British Note draws attention to the fact that Lon- 
don by no means agrees with Washington on the esti- 
mate of the petroleum resources of the various na- 
tions. While the potentialities of the future are 
necessarily problematical, the undisputed fact re- 
mains that at present United States soil produces 70 
per cent, of the oil production of the world. ^' It is 
not easy, therefore, to justify the United States Gov- 
ernment's insistence that American control should 
now be extended to resources which may be de- 
veloped in mandated territories. The British Gov- 
ernment, nevertheless, is in general agreement with 
the contention of the United States Government that 
the world's oil resources should be thrown open for 
development without reference to nationality. 

1 In reality, at the date of this Note, the United States were only 
producing 64 per cent., and a great part of this output is in British 
h^iids (Royal Dutch-Shell) . 



170 THE WORLD- STRUGGLE FOR OIL 

This somewhat hypocritical reply did not satisfy 
the Federal Government. Great Britain might be 
in agreement with its contention that "oil resources 
should be thrown open for development without ref- 
erence to nationality," but that did not make her 
open up Mesopotamia to Americans. And on the 
occasion of a meeting of the Council of the League 
of Nations at Paris, to examine in detail the problem 
of mandates, Washington, to annoy London, sent a 
Note on February 1, 1921, demanding that the ques- 
tion of mandates over former German colonies 
should be reconsidered. In the end America won 
her point, for during the negotiations which were con- 
ducted in London at the end of July 1922, Walter 
Teagle asked that the shares in the Turkish Petro- 
leum granted to the Anglo-Persian (50 per cent.), 
to the Royal Dutch (25 per cent.), and to France 
(25 per cent.) should be reduced in order to make 
room for American interests. Deterding protested, 
but finally accepted. The British Government gave 
way immediately. It is a doubtful victory for the 
United States, for who knows when this region will 
be pacified? And France will do her utmost to 
avoid the diminution of her share. The Angora 
Government showed itself at Lausanne determined 
to resume possession of the Mosul region, which is 
so rich in oil and which M. Clemenceau gave up to 
Britain with so little resistance. 



HOW THE UNITED STATES LOST 171 

The Struggle for Djambi 

Meanwhile the Royal Dutch, which, in agreement 
with the Anglo-Persian, had asked the British Gov- 
ernment to reserve for it the exploitation of Meso- 
potamian deposits, was endeavouring to monopolize 
the new deposits discovered at Djambi in the Sunda 
Islands. 

Djambi is the last great territory to be exploited 
in the Dutch Indies; the oil-fields in this district 
cover four million acres. At first the designs of the 
Royal Dutch met with no opposition, and it obtained 
from the Dutch Lower Chamber the grant of these de- 
posits for its subsidiary, the Bataafsche Petroleum. 
But two representatives of the Standard brought a 
communication to the Dutch Chamber and Ministers 
at The Hague. The Standard offered to found a 
company in partnership with the Dutch Government, 
which would hold half the territories of Djambi on 
the same terms as the Royal Dutch, It recalled the 
fact that in the United States the Dutch had been 
given every facility, and counted on reciprocal 
treatment. 

This unexpected communication caused great dis- 
turbance in the financial and political world of the 
Netherlands. A deputy asked if the note from the 
Standard came from the American Government. 
The Prime Minister replied that he did not know, 



172 THE WOÏILD-STRUGGLE FOR OIL 
but that in any case this note must express the views 
of Washington. A Socialist member proposed ex- 
ploitation of the whole field by the State; this was 
defeated by 55 votes to 24. The Liberals, fearing 
international complications, were opposed to the 
Government plan. Finally, the Second Chamber 
adopted this plan by 49 votes to 30. 

Thereupon a vigorous Note arrived at The Hague 
from Mr. Hughes, the Secretary of State, who nearly 
defeated Wilson on the occasion of his re-election to 
the Presidency and who holds to-day the most im- 
portant post in Mr. Coolidge's Cabinet. Mr. 
Hughes ordered the United States Ambassador to in- 
sist vigorously that the Dutch Government should 
grant the same facilities in the Dutch Indies to Amer- 
ican as to other companies. For, he said, the na- 
tionals of all countries have an equal right to vital 
natural resources, and one cannot forbid access to 
one particular nation. "We do not seek preference 
over other countries, but we do not wish other coun- 
tries to obtain advantages to our detriment. And 
concerning oil, the solution of the problem is to give 
equal rights to all the companies of all nations." 

The Government of the Netherlands sent to Wash- 
ington its reply to the American Note. It drew 
special attention to the disinterestedness shown by 
the Americans at the time when competition was free, 
a time chosen by the Royal Dutch to make a much 



HOW THE UNITED STATES LOST 173 

more advantageous offer than those of its rivals. 
In 1915 the exploitation of the deposits in the Sumatra 
regions was granted to the State; but in 1918 this 
ruling was modified, and it was decided that ex- 
ploitation might take place directly by the State, or 
through the agency of a company, or under the 
system of a State-controlled monopoly. 

At this time no American protest had reached the 
Dutch Government, and none was sent until after the 
signing of the contract between the Royal Dutch and 
the Government. 

However, added the Note, there still remain nu- 
merous valuable oil-fields in the East Indies, and 
the Dutch Government would be prepared to grant 
concessions to American capital. 

This affair seems to have been by no means set- 
tled by the vote of the Dutch Lower Chamber. The 
polemic continued between Washington and The 
Hague. In May 1921 the American Government 
demanded the publication of its Note of April 19th, 
which The Hague was determined to keep secret. 
And in Holland the Colonial Secretary was violently 
reproached for having concealed from the Chamber 
the details of the correspondence exchanged with the 
United States. I have been able to procure the text 
of the letter submitted by the Standard: 

"The development of petroleum deposits is at pres- 
ent a vital question for every country, and increas- 



174 THE WORLD-STRUGGLE FOR OIL 

ing attention must be devoted to it by the whole 
world. The Dutch colonies have the good fortune 
to possess extremely rich petroleum deposits, es- 
pecially in the Djambi region. The Standard Oil, 
an American limited liability petroleum company, 
asks to be allowed to share in the development of the 
deposits at Djambi, and a decision must shortly be 
taken on the matter. Considering the great extent 
of the oil-fields of Djambi, the Dutch Government 
will certainly not consider it to the interest of the 
country and people to allow them to be exploited by 
a single company. 

"The Standard Oil submits for the approval of the 
Dutch Government a scheme for founding a Dutch 
company under the mining legislation of the Dutch 
Indies, according to which part of the Djambi region 
would be exploited on the basis of the native law. 
This project would have to be submitted to the Second 
Chamber of the States-General. The Standard Oil 
declares itself ready to furnish all necessary guaran- 
tees for the exploitation of the said territory. 

"The Standard Oil is convinced that the Dutch 
Government will readily admit that the United States, 
which are and always have been the greatest pro- 
ducers of petroleum, could bring as much profit to 
Dutch interests as they have done for their own citi- 
zens.^ We American companies, therefore, believe 

1 The question, however, has not been settled as they desired. 



HOW THE UNITED STATES LOST 175 
that we have a right to share in the development of 
the petroleum fields of Djambi, and we are sure that 
this participation would serve the interests of Hol- 
land equally with those of the United States, and 
would help to strengthen the bonds of friendship 
which exist between the two countries." 

This did not have a soothing effect on public opin- 
ion in Great Britain. Since the War, wrote The 
Times, the question of petroleum had become an in- 
ternational question of the first order. Great Brit- 
ain took an especial interest in it; its security de- 
pended, more than that of other countries, on power 
over sea and air. Up to Trafalgar, when the es- 
sential thing was to have ships of stout oak, she 
watched carefully over her forests. . . . She could 
not do the same with oil, for she possessed so little 
in the Empire. 

The United States desire equality of treatment. 
Britain denies the justice of this claim. "United 
States soil," wrote Lord Curzon, "produces 70 per 
cent., and American interests in adjoining territory 
control a further 12 per cent, of the oil production 
of the world." Great Britain, he pointed out, had 
only 40 per cent., and that in distant territories. 

The United States replied that eighteen years from 
now all their oil would be exhausted, and they would 
not even be able to satisfy their home consumption. 
The orders for 1920 exceeded the output. "Not 



176 TiïÈ WOÏILD-STRÛGGLE FOR OIL 
so!" replied the British. The excessive demand 
caused the price of oil to rise, and the demand then 
diminished in reaction. You have even been 
obliged to lower the price. The price of Pennsyl- 
vanian crude oil fell from 6.10 to 3.00 dollars a 
barrel between December 1920 and April 1921. 
And as Mexico is developed the swing of the pen- 
dulum will continue in the same direction. But you 
need not fear the exhaustion of American petroleum. 
Read the reports of your experts. Mr. David White, 
of the United States Geological Survey, has given his 
opinion that the American fields will have passed 
maximum production in a few years' time. Mr. 
Lane, formerly Secretary of the Interior, has gone 
even further, and has estimated the percentages of 
exhaustion of the main oil-fields as follows: — 

Lima, Indiana 93 per cent. 

Appalachian 70 per cent. 

Colorado 65 per cent. 

Illinois 51 per cent. 

But Mr. White himself admits that there are in 
the United States many oil-fields insufficiently ex- 
ploited or even still unknown. As for Mexican pe- 
troleum, which is said to be threatened by salt water, 
there is no need for uneasiness. Exploitation there 
is only just beginning and will produce many pleas- 
ant surprises. 



HOW THE UNITED STATES LOST 177 

Lord Curzon, moreover, sweeps aside all statistics 
with a disdainful gesture. We cannot trust their ac- 
curacy, he says. But this gesture did not impress 
the United States; they were determined to obtain 
satisfaction at any price. 



180 THE WORLD-STRUGGLE FOR OIL 

War, from the Turkish Government. The whole of 
the valley of Yarmak, the neighbourhood of Bethle- 
hem (Vebi Musa), the south of the Dead Sea, and 
the east of the Jordan, were to be prospected by the 
Standard.^ Moreover, by the General Leasing Act 
of 1920, the Federal Government obtained authority 
to exact from every oil company operating in the 
United States, that it should number none but Amer- 
ican citizens among its shareholders. A judicial 
decision has just been given, refusing to British citi- 
zens the right to become shareholders in a company 
of this kind. Moreover, Mr. Daniels, Secretary of 
the Navy, wished to get a Bill passed through Con- 
gress, authorizing the President to place an embargo 
on the export of petroleum. The Royal Dutch-Shell, 
which now draws 43 per cent, of its output from the 
United States, would thus be unable to transport it 
to Great Britain. But on this point he is in conflict 
with Mr. Payne, the new Secretary of the Interior, 
who thinks the above-mentioned Bill a sufficient pro- 
tection for the United States. This Bill forbids the 
leasing of wells by a corporation of foreign share- 
holders, unless these latter belong to a country which 

1 It took America three years to obtain satisfaction as regards 
Palestine. On April 9, 1922, the British Government notified the 
State Department at Washington that it granted, at last, to the 
Standard Oil the prospecting rights which this company claimed, 
and conceded the same rights to Americans as to the natioiials q( 
all Governments signing the Treaty of Versailles. 



THE AMERICAN RETORT 181 

grants reciprocal treatment; the corporation, besides, 
must have a majority of foreign shareholders. 

The system of reciprocity was inaugurated by 
President Harding. Governments which allow free 
competition to American companies receive the like 
treatment. 

The permits solicited by the Royal Dutch will 
therefore probably be refused, while those sought by 
Canadian companies, such as the Midland Oil, are 
much more likely to be granted; it will be enough 
that their British shareholders become Canadians. 
For Canada has always allowed the Standard Oil 
very great liberty on her territory. In April 1919, 
she even refused the association of interests proposed 
by the Shell, for fear of offending Washington. If 
ever war broke out between Great Britain and the 
United States, Canada would almost certainly pro- 
claim her independence and break away from the 
British Empire. 

The General Leasing Act may become a danger- 
ous weapon in the hands of the Standard, and will 
perhaps be used by it to bring pressure on the Royal 
Dutch, which has several times refused its co- 
operation. Many Californian companies, subsid- 
iaries of the Shell, have already been called upon 
to prove that their shareholders are really American 
citizens as required by Congress. 

Thus, the threats uttered by Walter Teagle at the 



182 THE WORLD-STRUGGLE FOR OIL 
meeting of the American Petroleum Institute in 1920 
are beginning to be put into execution: "If foreign 
Governments insist on carrying out their policy of 
nationalizing oil-bearing territory, if they insist on 
keeping petroleum deposits for their own future 
profit, at the same time demanding from the United 
States the satisfaction of their present needs, then 
there is no alternative for us but to take note of their 
attitude and, as a means of self-protection, to ex- 
amine the methods of preserving our own oil for our 
own needs. Given their position in the world's com- 
merce and the economic and financial weapons they 
have in their hands, the United States could cer- 
tainly compel other countries to a redistribution of 
oil-bearing land, so as to obtain a part of those terri- 
tories which these countries wish to keep for them- 
selves." 

''Great Britain," Senator Phelan pointed out, 
''holds one half the worlds s oil and produces only a 
quarter, while the United States, owning one-sixth, 
produce three-quarters. In the possible conflicts of 
to-morrow, she desires, by means of oil, not only 
to have all the chances of success on her own side, 
but also to take from her future rivals, although 
they may be her friends of to-day, these same chances 
of triumph. She tries deliberately to diminish the 
resources of America, which will be exhausted in 
eighteen years, as things go at present." 



THE AMERICAN RETORT 183 

Shortly afterwards, in 1920, the former Secre- 
tary of the Interior, Mr. Franklin K. Lane, anxiously 
wondered whether Great Britain was acting in this 
way to prevent the growth of the American Navy. 
*'Now, do such proceedings lead to peace or war? 
Is it admissible that Britain — ^not merely British 
capitalists, but the State or Government of Great 
Britain, that is, a political entity — should take pos- 
session of a market of such importance and keep 
the rest of the world out of it? It is surely obvious 
that if not only nationals, but States themselves, rep- 
resented by Governments, take part in economic com- 
petition, and turn themselves into business houses or 
manufacturing firms, there is no hope of appeasing 
the conflicts which will constantly arise from com- 
mercial rivalry." 



CHAPTER XVI 
FROM WASHINGTON TO GENOA 

The Struggle for the Oil-fields of Russia 

A period of calm followed the Washington Con- 
ference. On his way to the United States, Sir John 
Cadman, the Grand Master of British Oil Policy, was 
lavish with protestations of peace and good will. He 
ajffirmed that British policy in no way aimed at elim- 
inating Americans from the oil-bearing regions of 
the world, and he even declared himself in favour 
of co-operation between British and American capi- 
tal in the exploitation of oil. "If," he added, "there 
are restrictions in certain Dominions and Colonies, 
it is because the home Government could not resist 
the demand for them. Besides, in Canada, the biggest 
company, the Imperial Oil, is American. In Trinidad 
there is a law excluding all but British companies 
from oil concessions upon Crown lands, but no re- 
striction exists upon other lands in the colony. In 
Burma also the participation of foreign capital is 
forbidden, but this prohibition is of long standing; 
it goes back 35 or 40 years, and there is reason to 
believe that it may soon be repealed." 

184 



FROM WASHINGTON TO GENOA 185 

Sir John Cadman went so far as to declare that he 
categorically repudiated all governmental interven- 
tion in the oil question. In the mouth of one of the 
directors of the Anglo-Persian, this statement is 
somewhat amusing. 

But undoubtedly, the British Government, feeling 
that it had gone too far, realized the necessity of 
dropping some ballast. During the Washington 
Conference, on the fringe of the main naval agree- 
ment, an oil truce was secretly negotiated. Britain 
even consented to allow the Standard Oil to establish 
itself in the five provinces of Northern Persia which 
had formerly been reserved for Russian interests. In 
order to obtain concessions form the Persian Gov- 
ernment, in spite of the initial opposition of the 
Anglo-Persian, the Standard had not hesitated to 
make use of the American minister at Teheran.^ 
The support which the representatives of Washing- 
ton never refused has always been one of the princi- 
pal causes of its triumphs. 

But the struggle between Britain and the United 
States was not long in breaking out again with re- 
newed intensity, this time for the conquest of the 
remaining oil lands, now escheat, from the Caucasus 
to the Urals and Turkestan. The Genoa Confer- 

1 I believe that the exploitation of these deposits will shortly be 
placed in the hands of the Sinclair Company, one of the most pow- 
erful American concerns after the Standard. A large number of 
shares in this company have recently been bought by the Standard. 



186 THE WORLD-STRUGGLE FOR OIL 
ence will be regarded by history, not so much as 
a great effort towards world peace, as a "Conference 
on Oil," at which the immense riches of the old 
Tsarist Empire were offered by Tchitcherin to the 
appetites of the Powers. I have developed this 
point in the preface to the Russian edition of this 
book, which has recently been translated under the 
direction of M. Melik-Noubaroff, formerly Presi- 
dent of the Imperial Technical Commission of Baku 
and chief engineer of the Nobel Company: 
"Though Russia, which held first place in the world's 
production for a few years at the beginning of the 
twentieth century, has now dropped back to third 
place, the reserves contained in her soil still exceed 
1,000 million cubic metres, almost equalling those 
of the United States and Alaska together (1,113 
million cubic metres). Persia and Mesopotamia, 
Mexico itself, as well as the north of South America, 
rank after her. All other countries are far behind. 
The time will come, perhaps in less than twenty 
years (exceptional circumstances apart) in view of 
the terrific rate of consumption, when the reserves of 
the United States will be exhausted; then Russia will 
play a big part in the world." The developed areas 
throughout Russia, Siberia, and the Caucasus are 
much smaller than the extent of the proved deposits, 
which themselves are but a small fraction of those 
whose existence has been indicated with certainty 



FROM WASHINGTON TO GENOA 187 
by preliminary surveys. The oil resources of Rus- 
sia represent alone one-sixth of the reserves of the 
world. Hence the greed and covetousness with 
which they were regarded at Genoa. 

The question of oil is the primary political ques- 
tion of the present age, but in this Conference at 
which the future of Europe was to be enacted, France 
was the only nation which seemed not to notice the 
fact. 

The Quai d'Orsay had not deigned to appoint a 
single oil expert to Genoa.^ More than that, I am 
in a position to state that the only one of the French 
delegates who was acquainted with the oil question 
had received precise instructions before his depar- 
ture to keep strictly aloof from all discussions about 
oil. It was, of course, manifestly impossible to 
expect to settle the question of Russia's oil at Genoa 
in the absence of any representative of the United 
States. The French delegation therefore held only 
a watching brief. 

By this self-denial France at any rate earned the 
distinction of taking no part in the scandalous con- 
cession-hunting which went on behind the scenes at 
Genoa while the Soviet delegates were discussing 
the great principles of international morality with 

1 Nevertheless, it had been warned as early as the previous 
March of the agreement which was afoot between the Shell and the 
Soviets, and it had seen the text of the contract. 



188 THE WORLD-STRUGGLE FOR OIL 

the official representatives of the Powers. Into this 
feverish atmosphere the news dropped like a bomb- 
shell that Krassin had signed a contract conferring 
upon the Royal Dutch-Shell a monopoly of the oil 
in the Caucasus. The news caused a great sensa- 
tion, and immediately provoked solemn denials, 
which were more resounding than convincing. The 
few oil magnates and their satellites who were not 
already at Genoa hurried thither prepared for battle. 
The French Government at once dispatched M. 
Laurent Eynac. 

The Cabinet, however, had decided that he alone 
should be attached to the delegation in an official 
capacity. And it was not until the afternoon of 
the day upon which it made this decision that it 
recognized the necessity of adding M. Pincan, the 
very able director of the Oil and Petrol Department 
of the Ministry of Commerce, on account of the fact 
that M. Eynac for over a year had been out of touch 
with his former colleagues. 

The French delegation adopted the Belgian point 
of view upon the restitution of private property, and 
energetically defended French pre-War interests in 
Russian oil, which, in December 1920, represented 
a value of 200 million francs. A common policy 
was elaborated in conjunction with the principal 
Belgian oil companies, whose importance in the Cau- 
casus equalled our own, with a view to the defence 



FROM WASHINGTON TO GENOA 189 

of rights acquired before and after the nationaliza- 
tion of mines and factories by the Soviets. In order 
to obtain absolute equality of treatment for French 
interests in the Caucasus, M. Laurent Eynac very 
pointedly called the British Government's attention 
to the stipulations of the San Remo Agreement. He 
relied upon Article 2 of the Agreement, based upon 
the principle of cordial co-operation and reciprocity 
in all countries where the oil interests of France and 
Britain can in practice be combined, and upon Article 
6, which runs thus : 

In the territories which belonged to the late Russian 
Empire the two Governments will give their joint support 
to their respective nationals in their joint efiforts to obtain 
petroleum concessions and facilities to export and to ar- 
range delivery of petroleum supplies. 

The British Government, anxious not to obstruct 
the private negotiations of the Royal Dutch-Shell 
and the Soviets, got out of the difficulty very skil- 
fully by giving to this latter clause a restricted in- 
terpretation. On May 15, 1922, in the House of 
Commons, Mr. Chamberlain went so far as to de- 
clare that Article 6 and the other analogous provi- 
sions of the San Remo Agreement would only be- 
come effective if French and British nationals de- 
cided jointly to acquire specific concessions. Na- 
tionals of a single country, like the British trusts, 



190 THE WORLD-STRUGGLE FOR OIL 

would therefore retain complete liberty of action. 
If, in the light of these explanations, one appre- 
ciates the threat of monopoly contained in the in- 
sertion, at the instance of the British delegation, of 
Clause 7 in the Memorandum of May 2, 1922, stipu- 
lating that in cases where the exploitation of prop- 
erty formerly belonging to foreigners could be as- 
sured only by incorporating them in a general group, 
the preferential right to the restitution of the property 
should not apply, one is driven to wonder what 
in such circumstances has become of the cordial 
"Franco-British co-operation" spoken of in the San 
Remo preamble. Would it not be merely an empty 
formula? 

• •••••• 

For a long time past, the Royal Dutch-Shell had 
been» striving to obtain a grasp of the oil deposits in 
Russia, and thus to realize, by arrangement with the 
British Government, its dream of world hegemony 
in oil. Its only reason for not amalgamating with 
the Anglo-Persian and the Burmah Oil at the begin- 
ning of 1922 was fear of American reprisals. The 
question was much debated, but after considerable 
hesitation Mr. Lloyd George refused to give his con- 
sent; so soon after the Naval Pact of Washington it 
would have caused something approaching a sensa- 
tion in the United States and would have appeared 
intentionally provocative. 



FROM WASHINGTON TO GENOA 191 

As soon as Britain had signed the trade agree- 
ment with Moscow, the Royal Dutch opened nego- 
tiations with the Soviet representatives, and it was 
not long before these relations bore fruit in the sale 
of 10,000 tons of oil to the Asiatic Petroleum, one 
of the Royal Dutch-Shell subsidiaries. 

I may mention here that the signatories on behalf 
of the co-operatives of Russian producers were Kras- 
sin, Rakovsky, Mrs. Varvara Polovtsef , Victor Nogin, 
and Basil Krysin. The notorious agreement between 
the Shell and the Soviets, which agitated the Press 
of the whole world and produced a scandal which 
almost wrecked the Conference, was not concluded 
at Genoa ; it was drafted in London during February 
in the following form: — 

The Russian Soviet Government is prepared to give con- 
sideration to a proposal by which the sale of all oil prod- 
ucts available for export from the various oil-fields of 
Russia would be placed in the hands of a syndicate formed 
upon the following basis: — 

The initial capital will be provided by equal contribu- 
tions from the Russian Government and the foreign group. 

The management of the syndicate will have control of 
all sales and will be entrusted to a Council composed of an 
equal number of representatives of the Russian Government 
and the foreign group. 

The syndicate will be responsible to the Russian Govern- 
ment for the most favourable sale of oil products possible. 
In order to derive the maximum advantage from such sale, 



192 THE WORLD-STRUGGLE FOR OIL 

the syndicate will provide or within an agreed period 
create the necessary distributive organization, which will 
entail a certain capital expenditure. 

It is suggested that the capital thus required be raised 
by the issue of bonds bearing a fixed rate of interest. 

Payment of the interest upon these bonds will be guar- 
anteed by the foreign group. 

The syndicate will receive, as remuneration for its ac- 
tivities, a certain commission upon all sales, which com- 
mission will be fixed upon a sliding scale according to the 
quantities sold. 

For quantities not exceeding 100,000 tons 5 per cent, is 
suggested; for larger quantities a proportionate rate will 
be arranged by mutual agreement. Furthermore, it is un- 
derstood that any surplus realized by the sale of Russian 
oil over and above the export price of the American mar- 
ket will belong entirely to the syndicate. 

After meeting working expenses, the profits thus realized 
will be applied in the first place to the payment of the in- 
terest upon any bonds which the syndicate may issue, and 
the balance will be divided equally between the two parties 
to the syndicate, i. e., the Russian Government and the for- 
eign group. 

These arrangements will hold good for five years certain, 
after which period the Russian Government will have the 
right to redeem the bonds at the price of issue or upon 
such other terms as may be stipulated at the time of issue, 
and to terminate the agreement. The Russian Government, 
however, will be obliged to give one year's notice at the 
end of the fourth year if it desires to terminate the agree- 
ment. In default of such notice, the agreement will hold 
good for another period of five years. 

It is understood that the Russian Government reserves 



FROM WASHINGTON TO GENOA 193 

the right at any time to sell oil products directly to foreign 
Governments, but such sales will in no case exceed 50 per 
cent, of the total quantity available for export in any year. 

The success of the syndicate will depend entirely in the 
early stages upon transport facilities between the places 
where the stocks of oil products are available and the ports 
of embarkation. Unfortunately, at the present time these 
facilities are in some measure lacking, and with a view to 
remedying the situation, the foreign party to the syndicate 
will be required to invest at least £500,000 in the transport 
system. This sum, as well as all other sums mentioned 
below, will be guaranteed by the Russian Government, and 
in case of necessity will be secured upon the stocks of Rus- 
sian oil. 

This money will be used for the purchase of the necessary 
rolling stock, for the maintenance of pipe-lines, and, if 
required, for the installation of new pipe-lines for the 
various products. 

Against the sums thus employed, transport bonds will be 
issued bearing interest at the rate of 8 per cent.; further- 
more, these bonds will carry the right to a bonus, the 
amount of which will be determined by the quantity of 
oil products transported over and above a pre-arranged 
quantity. 

The amount of this bonus will be fixed by mutual agree- 
ment, and will take the form of an agreed tax upon each 
pood of oil products transported in Russia over and above 
a pre-arranged quantity. 

Payment of the interest upon these bonds will be guar- 
anteed by the Russian Government, and in case of necessity 
will be secured upon the existing stocks of oil. 

The transport organization thus formed by the rolling 
stock to be acquired and by that which is at present avail- 



194 THE WORLD-STRUGGLE FOR OIL 

able will be under the management of a Council composed 
of an equal number of delegates of the Russian and the 
foreign group. 

All rolling stock and everything belonging to this joint 
undertaking will be exempt from requisition or confiscation 
whether by the Central Government or by local authorities. 

The Council of the undertaking will be free to appeal 
for qualified foreign workmen, and in general to administer 
and manage the business in the best interests of the enter- 
prise and the objects it has in view. 

Any additional capital which may be required will be 
provided by equal contributions from the Russian Govern- 
ment and the foreign group. 

Such additional capital will be raised by the issue of 
bonds bearing interest at a rate to be fixed by mutual agree- 
ment at the time of issue, the Russian Government being 
responsible for the subscription of one-half of the issue 
and the foreign group for the subscription of the other 
half. 

These bonds will carry the right to a bonus in the same 
way as the bonds mentioned above. 

The activities of the Council of the joint undertaking will 
be subject to all laws and decrees of the Russian Socialist 
Federal Soviet Republic and to all regulations which may 
be in force. 

Of all the employés of the syndicate in Russia, 50 per 
cent, only may be non-Russian. 

If an agreement upon this basis is deemed possible, the 
foreign group will have the right to appoint representatives 
in Russia to examine conditions of transport, to take samples 
of existing stocks, etc. 

After the expiry of ten years the Russian Government 
will be free to redeem the transport bonds at the price 



FROM WASHINGTON TO GENOA 195 
of issue or upon such other terms as may be stipulated at 
the time of issue. 

It is clearly understood that these terms will provide for 
certain bonuses at the time of redemption to be calculated 
upon the average profits of the joint enterprise during the 
last two years of its operations. 

The Russian Government will signify its intention to re- 
deem these bonds by the end of the ninth year at latest. 

I am aware that serious changes in this contract 
were contemplated by the two parties in the course 
of the negotiations. They were only to be intro- 
duced if Mr, Lloyd George succeeded in bringing 
about the de jure recognition of the Federal Soviet 
Republic, This agreement, which was duly in- 
itialled, but not signed, at Genoa, referred only to con- 
cessions for deposits not hitherto exploited. But 
the Soviet Government had given an oral promise 
to hand over to the English the fields which were 
already developed and which had been nationalized 
for the past four years. Moreover, during this win- 
ter, British groups, through Krassin as intermediary, 
had entered into relations with the former owners 
and had negotiated with them for the resumption of 
their concessions. The Bolshevik Government has 
always urged foreign Powers seeking to acquire a 
share of Russian oil to deal separately with the dis- 
possessed owners in order to protect themselves 
against all possible claims in the future. 



196 THE WORLD-STRUGGLE FOR OIL 

From the very beginning of 1922, the Royal 
Dutch spread a rumour in France that it was ex- 
periencing difficulties with the British Government 
and must rely upon the support of the French Gov- 
ernment. This manœuvre succeeded so well that, 
when the French representatives at Genoa were given 
precise information about the impending conclusion 
of the agreement between the Shell and the Soviets, 
they shrugged their shoulders and smiled contemptu- 
ously; the rivalry between the Royal Dutch and Great 
Britain was unquestionable. If the great trust ob- 
tained certain advantages, France would benefit; it 
was best to let it carry on. Their disillusionment 
was bitter. 

• •••••• 

Now the British Government, in conjunction with 
the Royal Dutch-Shell, has been seeking to obtain for 
itself the products of the oil wells of the Caucasus, 
not since 1922, but since 1919. The early negotia- 
tions proceeded slowly. Mr. Lloyd George had then 
but little confidence in the permanence of the Bolshe- 
vik régime. He did not even contemplate negotia- 
tions with its representatives. The financiers of the 
Royal Dutch-Shell approached only the most impor- 
tant of the dispossessed Russian oil magnates. On 
July 27, 1920, one of the most powerful subsidia- 
ries of the trust, the Bataafsche Petroleum, bought a 
large quantity of the shares in Caucausian compa- 



FROM WASHINGTON TO GENOA 197 
nies owned by MM. Mantasheff, LianosofF and 
Pitoieff . For the celebrated Russian actor, Pitoieff, 
is also a great oil proprietor. The purchase price 
was fixed at £11,042,000, of which £645,000 was 
paid in cash. The balance was to be paid by instal- 
ments, but the Russian proprietors have not re- 
ceived even the first. 

Events had moved quickly. Mr. Lloyd George 
had developed a sudden and violent sympathy with 
the Government of Moscow. He now saw in it a 
saviour who would secure for dormant British indus- 
try the work of reconstructing the immense devastated 
empire. He had decided to bestow upon it his of- 
ficial blessing, to obtain that of all Europe, and to 
approve its theories and practices, in particular na- 
tionalization. Henceforward, the Shell considered 
it had no further concern with the proprietors of the 
old régime. And Colonel Boyle, one of its most ac- 
tive agents, entered into relations with Krassin, who 
promised to reserve to the Royal Dutch-Shell the mo- 
nopoly of the export of Russian oil. 

Krassin promised everything he was asked, and 
allowed the contract to be drafted. But as soon as 
there was talk of signing it at Genoa, he gave the 
project such publicity that the general diplomatic 
hue-and-cry which resulted prevented its signature. 
It was the Soviets themselves which divulged their 
agreement with the Shell. They have no wish to 



198 THE WORLD-STRUGGLE FOR OIL 
place the greatest riches of Russia in the hands of a 
single people, and especially a people so successful 
and ambitious as the British. The British Govern- 
ment just failed to realize its greatest dream; the con- 
quest of the remaining oil deposits throughout the 
world — a conquest which would have assured its su- 
premacy in the future and would have made all other 
peoples its tributaries. 

But, in spite of everything, I believe in the future 
of the British people, one of whose leaders was not 
afraid to say, twenty years before Germany had be- 
gun to dream of European hegemony: "I believe in 
this race, one of the greatest governing races the 
world has ever known, this Anglo-Saxon race, proud, 
tenacious, self-confident, resolute, which no climate 
and no vicissitude can corrupt, and which will infal- 
libly be the predominant force in future history." 



PART IV 



FRANCE'S PART IN THE STRUG- 
GLE BETWEEN GREAT BRITAIN 
AND THE UNITED STATES 



CHAPTER XVII 
THE CARTEL OF TEN 

In this bitter struggle between Britain and the 
United States for dominion over the world's oil, what 
is France's position? France as yet possesses very 
little oil, although petroleum has been found in vari- 
ous parts of her colonial empire and that of Alsace 
has been restored to her; but on account of her poli- 
tical importance, she is a "second" who may decide 
the victory. Hence the efforts made by the two great 
Anglo-Saxon nations for her alliance. 

After 1870, there was no free competition in petro- 
leum in France. The industry fell into the hands of 
the great firms which, sheltered behind the customs 
barriers established by the National Assembly at Ver- 
sailles immediately after the Commune, formed a 
cartel enjoying a veritable monopoly, and apportion- 
ing the different regions of France. These ten firms 
did not compete. They fixed their prices in agree- 
ment and shared among themselves the quantities to 
be sold. It would have been impossible for an elev- 
enth to establish itself in France without their con- 
sent. In the original cartel of 1885 there were only 

201 



202 THE WORLD-STRUGGLE FOR OIL 

three members; round these the other existing re- 
fineries grouped themselves in 1893. Thus the Car- 
tel of Ten was formed: — 

Fenaille et Despeaux, 

Désmarais frères. 

Fils de A, Deutsche 

Compagnie Industrielle des Pétroles, 

Raffinerie du Midi. 

Société Lille-Bonnières et Colombes (L.B.C.). 

Paix et Cie. 

G. Lesieur et ses fils. 

Compagnie Générale des Pétroles. 

Raffinerie de Pétrole du Nord. 

These were the ten firms which, protected by the 
ridiculously high customs tariff fixed on July 8, 1871, 
had monopolized for their own profit the sale of the 
petroleum brought in by the then all-powerful Stand- 
ard. With a total capital not exceeding 100 million 
francs, they made for the ten of them a profit of 50 
million francs a year.^ Thus, France paid more for 
her oil than any other country in Europe. Protected 
by its agreement with the trusts by which it guaran- 
teed them the monopoly of its supplies, the cartel did 
not exert itself. We had only 400 tank-wagons, 
54 ill-organized depots, and 17 refineries. The 

1 Henry Bérenger, Le Pétrole et la France^ p. 280. 



THE CARTEL OF TEN 203 

process of refining in France has never employed 
more than 300 to 400 men, of whom just over a third 
were specialists.^ Their fleet of tankers in 1914 
comprised only 14 small boats of 3,000 to 6,000 
tons, of which only three sailed under the French 
flag. The others were under the British flag "in 
order to profit by the less burdensome shipping reg- 
ulations." It was a veritable humiliation for 
France, when, at the beginning of the War, she had to 
beg Great Britain to be good enough to return them. 
Britain had requisitioned them. If the two countries 
had not been allied, France would have been dis- 
armed from the very first day! Eight of these ships 
were sunk during the War, and when the cartel was 
asked to build new ones it refused, "so as not to give 
off'ence" to the great trusts. 

Except for Charles Paix, who made a disastrous 
attempt to the south of Cheliff* in Algeria, none of 
the "oil men" tried to discover petroleum in France 
or her colonial empire, and so to endow the country 
with a real independent petroleum industry. They 
much preferred, with the aid of the Standard, to draw 
large profits without running any risks. A remark 
of M. Deutsch de la Meurthe on this subject has be- 
come famous: "The greatest misfortune that could 
happen to us would be to discover petroleum depos- 
its." M. Barthe well remarked in the course of a 

1 Le Page, U Impérialisme du Pétrole, 



204 THE WORLD-STRUGGLE FOR OIL 
comprehensive indictment: "Our oil magnates have 
been neither producers nor transporters of oil, and 
they have not even continued to be refiners." For, 
since the law of 1893, which lowered the import duty 
from 20 francs to 9 francs a metric quintal ^ for 
crude oil, and from 32 francs to 13.50 francs for re- 
fined oil, thus reducing the incredible difference of 
120 francs a ton between the two, the Cartel of Ten 
has arranged with the Standard Oil to bring into 
France refined American oil with 7 or 8 per cent, of 
residual impurities, which it passes as crude oil, so 
frustrating the fiscal duty and realizing enormous 
gains. The understanding with the Standard was 
changed about 1904 to a close dependence; the Ten 
became nothing more than Rockefeller's representa- 
tives in France, his oil importers. The Standard 
fixed the quantities to be sold by each one and made 
them sign an undertaking to sell at the prices fixed by- 
it at the beginning of each week. In the old refin- 
eries of Paris, Rouen, Bordeaux, etc., the agents of 
the Standard carried on a simple process of distilla- 
tion, a mere pretence of refining, well-known under the 
name of "cracking." They imported a mixture of 
mineral spirit and petroleum, oil manufactured in 
America, a mixture which they had only to heat 
slightly in order to separate the volatile spirit 
(petrol) from the heavy constituents (petroleum 
1220 lb. 



THE CARTEL OF TEN 205 

oils). This fiction has always been admitted by the 
State officials. It has allowed really refined oils to 
come into the country as crude oil, paying the mini- 
mum duty. Millions have thus been lost by the 
State to the profit of a few privileged individuals. 

Later on, when the cartel made an arrangement 
with André et Cie, that they should deliver Russian 
oil to it alone, the Standard wanted the agreement 
submitted to it for ratification, and laid down the 
condition that André et Cie, should only make de- 
liveries in the proportions it decided upon. 

Thus, the Standard was dominant in France up to 
the War, fixing prices and eliminating other im- 
porters. But, in spite of the lowering of the customs 
duties in 1893 they still remained so high that the 
Conseil Supérieur de Navigation Maritime, at its 
meeting of May 15, 1913, complained of the difficul- 
ties of procuring petroleum in France at reasonable 
terms." Mazut, the price of which is very low, could 
not enter the country on account of the 9 francs duty, 
with which the legislature had burdened it without 
discriminating between various kinds of crude oil 
of greater or lesser value. In 1918, the world as a 
whole was consuming 30 miUion tons of mazut, 
France not one quintal. And her shipping was very 
much behind that of other nations with regard to the 
use of the Diesel engine. Very few of her vessels 
burned oil. "What absolutely prevents the fitting up 



206 THE WORLD-STRUGGLE FOR OIL 

of our ships" wrote the Under-Secretary of State for 
the Merchant Marine, in a letter to the Minister for 
Commerce on June 2, 1913, "is the exaggerated 
price of liquid fuel caused by the fiscal exactions." 
On July 21st, M. Charles Roux, president of the 
Comité Central des Armateurs, took steps to obtain 
a lowering of these tariffs. They were without re- 
sult until 1919, the year in which M. Clemenceau got 
the Chamber to pass the law of August 7th, which 
lowered the import duties on mazut from 9 francs to 
0.40 francs. At last the prohibitive customs barrier 
was broken down. The tax on coal was then 1.10 
francs a ton. A ton of liquid fuel paid duties one 
hundred times as high (90 to 120 francs) . From the 
fiscal point of view, this tax brought in nothing to 
the Treasury. It was so high that it prevented all 
importation. And thanks to that, also, France was 
left behind by all her rivals. 



CHAPTER XVIII 
THE PETROLEUM CONSORTIUM 

At the beginning of the War, the French State pos- 
sessed no reserves of petrol or petroleum: a new ex- 
ample of the unpreparedness so often remarked! 

The "refineries" disposed of a stock amounting at 
the end of July 1914, according to the Customs sta- 
tistics, to: — 

408,200 quintals of crude oil, 
433,560 quintals of refined oil, 
342,090 quintals of petrol. 

To meet the earliest needs, these were requisitioned. 
But, from the month of September, this method was 
changed for that of contracts with the "Ten." The 
cartel undertook to meet the needs of France; it made 
itself responsible for purchases from abroad. The 
State was thus a mere customer enjoying the rights of 
priority over other customers. 

The consumption was then unimportant. At the 
time of the first battle of the Marne, France had 22 
squadrons of 6 aeroplanes (= 132), with engines 
of 80 or 100 horse-power; 110 motor-lorries and 50 
tractors (=160). The Germans had 70,000!' 

1 Report placed before the Chamber on March 20, 1919, by the 
Due do ]a Trémoïlle. 

207 



208 THE WORLD-STRUGGLE FOR OIL 

At the time of the battle of Champagne, France had 
4,000 aeroplanes and 8,500 motor-lorries; that com- 
pelled her to increase her reserves of oil from 22,000 
to 40,000 tons. But the crisis as regards supplies be- 
gan in April 1916. Payments to foreign countries 
were more than could be met by the cartel, which, 
having just paid an account of a hundred million 
francs for purchases made by the State, could ad- 
vance no more money. The position grew steadily 
worse and reached its culminating point after the 
United States came into the War in November 1917. 
The original little fleet of tankers quickly proved as 
inadequate as the size of the docks provided in our 
ports, which were intended for boats of 4,000 to 5,- 
000 tons while the American tank-steamers were of 
10,000 to 15,000 tons. On December 5, 1917, the 
Cartel of Ten had to confess its impotence and resign 
to the State a task which was too much for its powers. 
The stocks ran grave risk of becoming too completely 
exhausted on March 1, 1918. It was imperative "to 
effect a reorganization which history will record as 
one of the most substantial triumphs of the Entente 
at the decisive moment, and which resulted — thanks 
to the pressure on behalf of France which President 
Wilson put on the Standard — in doubling the figures 
of our importations of oil and petrol" (Report ad- 
dressed to M. Clémentel, Minister of Commerce, in 



THE PETROLEUM CONSORTIUM 209 

April 1918). Mr. Wilson, as soon as he received 
M. Clemenceau's moving appeal, summoned Bedford 
and W. Teagle to his room, and insisted that a cer- 
tain number of their ships should be taken off their 
usual routes and sent to France. Eight days later, 
three magnificent tank-steamers entered a French 
port, bringing 30,000 tons of petrol. And since 
then, thanks to a new system of rotation of ships, 
France was enabled to receive annually a quantity 
which, finally, exceeded a million tons. (Each boat 
was made to do one extra voyage a year; that gave a 
gain of 160,000 tons.) Consumption steadily in- 
creased ; the requirements at the front rose, at certain 
times, to 1,800 tons a day, France consumed: — 



Tons. Tons. 



1914 (first half-year: peace)... 200,000 ■ . ^^ Q/^(^ 

1914 (second half-year: war).. 276,000^ 

1915 457,000 

1916 640,000 

1917 610,000 

1918 1,000,000 

87% per cent, of this oil ivas supplied by the 
American continent, the United States, Mexico, Trin- 
idad, South America, etc. ; 12/4 per cent, only by the 
Old World, That is why, in case of a new war, it 
would be impossible for any Power whatever to gain 
the victory if its tank-steamers could be barred from 
access to the New World, 



210 THE WORLD-STRUGGLE FOR OIL 

During the month of October 1918, alone, the con- 
sumption of the Allied armies was: — 

French 39,000 tons 

American 20,000 tons 

British 32,000 tons 

The Shell could scarcely cope with the task of sup- 
plying the British Army. But for the help of the 
Royal Dutch and the Standard Oil, "we should have 
had to cease hostilities to our disadvantage, in the 
fifth month of the War." ^ 

After the Cartel of Ten was obliged to confess its 
impotence in the midst of a crisis which nearly lost 
the War, its work was limited to putting into good 
condition the products bought and stored by the State. 
Its rôle had become singularly unimportant when the 
Minister of Commerce transformed it into a con- 
sortium. 

The petroleum consortium was born of the neces- 
sities of war, like the consortium of cotton and the 
consortium of oils. In the midst of these great con- 
flicts, powerful economic associations, controlled by 
the State, can alone save national manufactures and 
commerce from perishing for want of materials, and 
can supply the enormous requirements created by the 
war. When, through fear of other countries, the 
French Republic took the form of an absolute mon- 
archy, it inaugurated, under the guise of a protective 

1 Statement by M. Henry Bérenger in the Senate, June 2, 1920. 



THE PETROLEUM CONSORTIUM 211 

State socialism, a system of intense exploitation of 
the nation's economic forces and of its products, 
which were monopolized, seized, or requisitioned. 
The Government was, in fact, reduced to a society of 
consortiums, which, each in its own domain, were the 
sole buyers and distributors of wealth. There was 
the Comité des forges to deal with metallurgy ; there 
was another for oil. 

Because of the difficulties of importation, manual 
labour, raw materials, freightage, and exchange, the 
simple liberty of the merchant or the isolated man- 
ufacturer is no more than an empty word, perhaps 
even a dangerous illusion. 

The system of the consortium was urged by the 
United State Government. Having created central- 
ized organizations for its exports, it desired that these 
organizations should come into contact, not with scat- 
tered merchants, but with the Allied States themselves. 
The important inter-allied agreements made in Paris 
and London, in November 1916 and December 1917, 
on the initiative of M. Clémentel, confirmed the prin- 
ciple of these industrial and commercial syndicates, 
financially responsible to the State, which becomes a 
direct buyer. Besides, the French State was not anx- 
ious to see the incredible profits which were going 
to result from the doubling of oil imports — imports 
of a value of a thousand million francs yearly — fall 
into the hands of the Cartel of Ten. It therefore im- 



212 THE WORLD-STRUGGLE FOR OIL 

posed upon it, on March 29, 1918, after three months 
of inquiries and hesitations, a curious contract. 

The State reserved to itself the monopoly of the 
purchase and import of oils, and sold them to a spe- 
cial organization (the consortium), constituted under 
the form of a limited company with a capital of 
thirty million francs, of which half was to be paid up 
immediately. This company undertook delivery of 
the commodity, reimbursed the State for its expend- 
iture (cost, insurance, freight), itself met the charges 
for unloading and storage, and re-sold the oil to the 
ten members of the cartel at prices fixed for each 
variety by the Ministers of Commerce and Supply. 
The distributive trade within the country was left 
free. Each of the Ten subscribed towards the forma- 
tion of the capital in the following proportions : — 



Nominal Capital 


Paid-up 


subscribed. 


Capital. 


Francs 


Francs 


4,725,000 


2,362,500 


4,725,000 


2,362,500 


4,725,000 


2,362,500 


3,861,000 


1,930,500 


3,504,000 


1,752,000 


2,526,000 


1,263,000 


2,238,000 


1,119,000 


1,428,000 


714,000 


1,284,000 


642,000 


984,000 


492,000 



Percentage. 



Fenaille et Despeaux 

Désmarais frères 

Fils de A. Deutsch 

Cie. Industrielle des Pétroles 

Raffinerie du Midi 

Société L.B.C 

Paix et Compagnie 

Cie. Générale des Pétroles . . , 

Lesieur et fils 

Raffinerie du Nord 



Francs 

15.75 

15.75 

15.75 

12.87 

11.68 

8.42 

7.46 

4.76 

4.28 

3.20 



30,000,000 1 15,000,000 — 



THE PETROLEUM CONSORTIUM 213 

As the consortium was founded in the general inter- 
est, they agreed to take interest at the rate of only 
6 per cent, on the capital they had provided. Be- 
yond that, all profits were to go to the State. They 
were fairly high, for on July 1, 1919, they amounted 
to 67 million francs. 

This organization constituted a first monopoly of 
importation by the State, under the financial manage- 
ment of the consortium, which arranged for the re- 
ception and storage of the products and their sale to 
refiners. Under the system which prevailed before 
that of the consortium, the Ten pocketed the supple- 
mentary profits arising from buying and transport. 
These were retained by the consortium for the bene- 
fit of the community. 

The oil magnates will never forgive the State for 
interfering with their affairs. According to M. 
Henry Bérenger, "although the State left to the car- 
tel a large share in the management and the profits — 
more than 100 million francs — the latter never con- 
sented with a good grace to the intervention of their 
country's Government in matters concerning oil. 
They never freely accepted the principle of collabora- 
tion with the public authorities." In August, 1918, at 
the height of Marshal Foch's offensive, a grave crisis 
arose from the extraordinary particularism of the oil 
magnates. For fear of losing an additional profit 
of 15 centimes a litre, they refused to pool their cans, 



214 THE WORLD-STRUGGLE FOR OIL 
as the French High Command required of them. The 
reports sent in at this time by General Head-quarters 
are categorical in tone. The resistance from private 
interests became so strong that the Government de- 
cided, in the critical days of the great advance, to 
create a Commissioner-General for Petrol with full 
executive powers to subordinate rigorously all pri- 
vate commerce in oil to the requirements of the pub- 
lic safety. 

M. André Tardieu, the High Commissioner at Wash- 
ington, was sometimes also greatly impeded in his 
negotiations by the Ten. From the end of 1917, he 
made direct purchases of oil from the Standard Oil, 
the Atlantic Refining, and the Texas Oil, because of 
the difficulties that had been made for him by the 
rivalry and manœuvring which he denounced in his 
telegrams. While the French Government was try- 
ing to buy at £5, the oil dealers were offering £7 10s. 
Their clumsy and inopportune intervention furnished 
the Standard Oil in many cases with an instrument of 
pressure.^ 

1 Affairs of the Archbold, the Goldshell, and the Muskogee. 
André Tardieu's reply to the oil magnates when challenged by them 
to state exactly when and how his mission was impeded by their 
proceedings. 

The oil-men revenged themselves for the State collaboration which 
was imposed upon them by a bitter criticism of the system of the 
consortium in the Revue Politique et Parlementaire: accounts badly 
kept; profits arising from the State's arbitrary allowances for work- 
ing expenses; ships arriving in ports where they were not expected, 
and without bills of lading (hence no means of control), etc. . . . 



CHAPTER XIX 

HOW GREAT BRITAIN WON OVER 

FRANCE TO HER SIDE IN THE 

STRUGGLE WITH THE 

UNITED STATES 

I. Activities of the Royal Dutch and 
THE Anglo-Persian. 

On the morrow of the Armistice, on November 21, 
1918, Lord Curzon gathered together all the mem- 
bers of the Inter-Allied Petroleum Conference at a 
great banquet, and there uttered the famous saying: 
"The Allies floated to victory on a wave of oil." M. 
Henry Bérenger, the French Commissioner for Petrol, 
proposed to retain the great inter-allied organizations 
for the distribution of oil, wheat, coal, etc. The 
Standard Oil refused. Besides, Sir John Cadman, 
Sir Marcus Samuel and Lord Curzon were not sorry to 
regain their freedom. They had only one idea — ^to 
bring to a successful conclusion their vast scheme, 
followed up for ten years with such admirable tenac- 
ity, in every country of the globe, for the acquisition 
of oil-bearing territories. 

France, in compensation for the great damage she 
215 



216 THE WORLD-STRUGGLE FOR OIL 
had suffered during the War, was to receive important 
rights for the development of concessions in Galicia, 
Rumania, and Turkey, formerly belonging to Ger- 
many. The great thing was to keep out the American 
rival. To attain this end, as M. Delaisi pointed out, 
the task was rather complex. Several things were 
necessary: — 

1. To negotiate directly with the Quai d'Orsay in 
order to get the principle admitted of an exclusive 
association between France and Great Britain, for 
the exploitation of French concessions throughout the 
world; 

2. To create Franco-British companies to carry out 
this agreement; 

3. To establish a State monopoly in France, which, 
under pressure of diplomatic conventions, would be 
bound to keep off American competitors. 

On January 21, 1919, although the War was over, 
the mandate of the Petrol Commission was extended 
for another six months. The State retained the mo- 
nopoly of buying oil and the system of the consor- 
tium. That prevented our oil-men from working 
hand in hand with the Standard Oil as they did be- 
fore the War. 

Then, on January 30th, M. Clemenceau granted 
diplomatic powers to M. Henry Bérenger. He im- 
mediately sent commissions of inquiry into every 
country in which France might have petroleum in- 



BRITAIN WINS OVER FRANCE 217 

terests, to London, Warsaw, Bukarest, Constantino- 
ple, Baku, and Mesopotamia. M. Bérenger was all 
in favour of a great scheme for founding an inter- 
allied company in which the French State, bringing 
as its share the German concessions which would be 
ceded to her by the treaty of peace, should enter into 
association with Great Britain and the Royal Dutch. 
On March 7th, the Walter Long-Bérenger agreement 
was signed, fixing the broad outlines of a common oil 
policy in Mesopotamia, Rumania, and eventually in 
Galicia and Russia. It was a preliminary sketch of 
the San Remo Agreement. It remained only to pre- 
pare for its realization. Eighteen days later, without 
losing any time, the Royal Dutch offered to co- 
operate in the plans of the French Government in 
matters concerning the management and exploitation 
of the various oil interests which might be reserved 
to France as a consequence of the treaty of peace. It 
proposed, moreover, to place at France's disposal 
"all its world-wide technical, industrial, commercial 
and financial organization, not only in the countries 
mentioned, but also in all other countries" in which 
she might need its co-operation. And it offered to 
supply France by priority, in time of peace as in time 
of war. 

M. Clemenceau welcomed the proposal. In order 
not to offend Parliament and public opinion, which 
was tending more and more in favour of a national 



218 THE WORLD-STRUGGLE FOR OIL 

oil policy, the Royal Dutch entered into partnership 
with one of the great commercial banks, the Union 
Parisienne, in order to create with its concurrence 
companies of which the nationality, if not the capital, 
should be French. 

In this manner were created the Société pour 
V Exploitation des Pétroles in July, and the Société 
Maritime des Pétroles in August 1919, the former 
with a capital of 20 million francs, and the latter of 
10 million francs. In the first of these companies 
five out of nine of the directors bear names well- 
known in the Royal Dutch: Deterding, Gulbenkian 
(the Talleyrand of oil), Colijn, who at one time 
nearly succeeded Deterding and who has been Min- 
ister of War in the Netherlands, Cohen, Jonckheer, 
Hugo. France has only a minority on the Board of 
this "French" company, for M. Deutsch de la 
Meurthe, whose influence brought over the Cartel of 
Ten from the side of the Standard to that of the Royal 
Dutch, is little more than the mouthpiece of London 
and The Hague. The Royal Dutch, besides, sub- 
scribed 60 per cent, of the capital of the Société pour 
l'Exploitation des Pétroles, though it now holds only 
49 per cent. In the Société Maritime des Pétroles, 
the disproportion is still greater; out of seven direc- 
tors, two only are French, and have played an impor- 
tant part in French politics during the last few years. 
It is to them, in particular, and to the skill of Gulben- 



BRITAIN WINS OVER FRANCE 219 
kian, who conducted the negotiations very cleverly, 
that the Royal Dutch owes its triumph in French offi- 
cial circles/ 

But the British Government is not content with these 
two companies founded by the Royal Dutch, (The 
second is so little French that 19,600 out of the 20,- 
000 shares of its capital belong to the Anglo-Dutch 
trust, and 400 only have been subscribed by the two 
French members of its council.) In spite of the op- 
position of Parliament, it authorized the Anglo- 
Persian to found a company much more important 
than the other two put together, a company with a 
capital of 227 million, the Société des Huiles de 
Pétrole, This Franco-British Anglo-Persian was 
created by one of the most powerful personalities of 
the financial world in Eastern, Southern, and West- 
ern Europe,^ to whom Great Britain owed the policy 
she was then following against the Turkish Empire/ 

Through the agency of Sir Basil Zaharoff, who is 
interested both in the Société Navale de l'Ouest and 
in the Banque de la Seine, and holds 70 per cent, of 
the capital of Vickers, this British firm undertook to 
construct immediately, giving preference over the 
other trusts, the whole of the tank-boats, of 10,000 

^ These facts are still too recent and too controversial for me to 
be able to make any more detailed reference to them» 

2 Agreement signed in London, October 27, 1920. Cp. chap, xi, 
A State-subsidized Company {the Anglo-Persian). 

3 Policy of the "Auxiliary Greek Empire.** 



220 THE WORLD-STRUGGLE FOR OIL 
tons on an average, destined to ensure to the new 
"French" company the monopoly of the transport of 
oil for the French market. France will depend for 
its future supplies, in great part, on this Franco- 
British Anglo-Persian, Its stations will be found on 
all her coasts, as well as in her African possessions. 
The Société Générale des Huiles de Pétrole will erect 
vast reservoirs at Dunkirk, Le Havre, Rouen, Saint- 
Nazaire, La Pallice, Bordeaux, Marseilles, Bizerta, 
Algiers, Oran, Casablanca, and Dakar (Senegal). 

As the United States will probably still have the ad- 
vantage for another dozen years as regards oil sup- 
plies — ^for it is not very likely that they will exhaust 
their reserves so soon as 1927, as the Smithsonian 
Institute pretends — , the new enterprise set out to 
gain immediate control in the matter of tank-steamers. 

Everything being thus prepared in the banks and 
chancelleries, it only remained to drive out the Stand- 
ard Oil from the French market and to establish 
firmly the monopoly of purchase and importation 
granted provisionally to the Petrol Commission. On 
May 6, 1919, M. Henry Bérenger announced in the 
Chamber the profits which remained for the State 
under the consortium system — profits not paid into 
the Treasury, but devoted to a special object, 
the development of the petroleum industry; and 
on June 17th, M. Klotz brought forward a Bill to 
establish this monopoly permanently. 



BRITAIN WINS OVER FRANCE 221 

The Standard, which, since the Armistice, had been 
impatiently waiting for the time when restrictions 
upon trade in France would be removed, no longer 
had any illusions about the desire of the Commission 
to expel it from that country. Although the Stand- 
ard had resumed its freedom from the conclusion of 
hostilities, it had none the less continued its supplies 
of oil to France, and knowing the Treasury was in 
difficulties, had accepted 5 per cent, bonds in pay- 
ment. Now, in self-defence, it declared that it 
refused all credit. 

The Oil Commission, in thus breaking free, had 
taken precautions against being caught improvided. 
Three days after the rupture with the Standard, on 
November 25th, it obtained a credit of £2,000,000 
from the Royal Dutch, which was increased on Jan- 
uary 5, 1920, to £5,000,000. The Standard Oil was 
ejected and the great Franco-British trust established 
in its place, thanks to this long-date contract. 

But shortly after the fall of the Clemenceau Cab- 
inet, this success came near to being undone. No new 
commissioner had been appointed in place of Henry 
Bérenger: a high official of the Exchequer was given 
the title of Director-General. The politics of oil, 
when we needed a real Petroleum Department, as in 
Britain, were reduced to the common level of current 
events. 

For more than a month (February-March, 1920), 



222 THE WORLD-STRUGGLE FOR OIL 

what remained of the Petrol Commission was left at a 
loose end, only indispensable deliveries were made. 
A state of anarchy ruled. The stocks, which had, 
until then, been laid in four months in advance, fell 
to almost nothing. The Standard Oil took advantage 
of this to regain its footing. 

In spite of its promises, the Royal Dutch did not 
succeed in delivering sufficient quantities of oil. By 
March 13, 1920, the reserves had fallen below the 
danger-line, to less than 75,000 tons. The Director- 
General, anxious about supplies, decided to resort to 
the Americans. And as the powers of the Petrol Com- 
mission had been legally extinct since April 26th, 
and its provisional monopoly at an end since April 
21st, he established the system of authorizing imports, 
and granted licences to several companies which had 
made contracts with the Standard Oil. Would the 
Standard Oil succeed in re-entering France? 

It was not given the time, for the San Remo Agree- 
ment had just been signed (April 24, 1920). A few 
days later, the French Government resumed control 
of oil, and M. Laurent Eynac, the new Commissioner, 
taking the view that what had happened during the 
interregnum had no legal existence, hastened to annul 
the licences to import granted to the Standard, 

The great American trust found once more in 
France, as it had so often found since the War in 
other parts of the world, the "closed door." 



BRITAIN WINS OVER FRANCE 223 

II. Diplomatic Negotiations 

"The diplomatic history of the Franco-British ne- 
gotiations concerning Mosul will, when it is made 
known, constitute the most eloquent document upon 
British policy towards France." ^ According to the 
agreements of 1916, Mosul was in the French zone 
of influence in Arabia. Great Britain began by ob- 
taining the cession of our territorial rights, as recog- 
nized by this treaty. The French Government gave 
way to her desires in spite of the opposition of its 
Foreign Minister. But when, later on, we demanded 
in compensation that 50 per cent, of the oil of Mosul 
should be reserved for us. Great Britain produced 
at the propitious moment the difficulty, unsuspected 
by our negotiators, of the Turkish Petroleum, a com- 
pany which she had opportunely created in collabora- 
tion with the Royal Dutch a few months before the 
declaration of War in 1914. Now the Turkish 
Petroleum had obtained from the Turkish Govern- 
ment the grant of all the naphtha of the vilayets that 
we lost in renouncing the Sykes-Picot Agreement of 
1916. So, having abandoned Mosul, all we were to 
receive in exchange was the oil with which Britain 
consented, as a special favour, to supply us. 

"When one knows England well," wrote M. Le 

1 Revue Universelle, October 15, 1920, Le Page, L'Impérialisme 
du Pétrole. 



224 THE WORLD-STRUGGLE FOR OIL 
Page, with justice, "one is not surprised that, when, 
with the help of France she has driven out America 
from the territory she covets, she should strive to 
throw over her helper, having got rid of her rival." 
The petroliferous basin, which extends from 
Persia to Mesopotamia, is one of the most extensive 
as yet discovered in the whole world. The great de- 
posits reach as far as twenty miles to the north of 
Mosul. In the valley of the Naphat, the oil flows 
naturally into the river. At Hit, on the Euphrates, 
there are asphalt deposits which have long been ex- 
ploited by the natives. And it is probable that this 
petroleum basin, which also includes Palestine,^ con- 
tinues through Syria right to the shores of the Medi- 
terranean. Near Latakia (Laodice) there are as- 
phalt beds, which the Latakia Oil, a British com- 
pany, has been exploiting since 1915. On the east- 
em side of the Gulf of Alexandretta, the streams 
which flow down from Mount Alma bear traces of 
oil. Thus, it is not surprising that this region has 
aroused, and still arouses, so much covetousness 
among the Powers. As early as 1903, the Imperial 
Ottoman Bagdad Railway Company, the famous 
Bagdad Bahn, obtained the grant of the right of ex- 
clusive exploitation of all deposits found within a 

^ The Standard Oil obtained the grant of seven concessions there, 
to the south of the Dead Sea, which the British are preventing it 
from exploiting. 



BRITAIN WINS OVER FRANCE 225 
distance of fifty kilometres from its lines. Ger- 
many transferred this right to the Turkish Petroleum 
when the latter company was created. The capital of 
the Turkish Petroleum was, to begin with, 

50 per cent. British; 

25 per cent. German (Deutsche Bank) ; 

25 per cent. Dutch (Royal Dutch), 

Germany's share has been handed over to France 
by Great Britain in order to obtain her support in 
the struggle against the United States. 

As the War broke out almost at once, the Turkish 
Petroleum had not time to begin the exploitation of 
the oils of Mesopotamia. After the new King of 
Iraq has decided definitely what is to happen to 
them, it will take nearly five years to develop them 
fuUy. 

In 1914, an Anglo-German agreement had ex- 
pressly recognized the rights of France in Asia Minor. 
These rights, moreover, were respected in all essen- 
tials in the agreements between France, Russia, and 
Great Britain, in 1915 and 1916, for the partition 
of Asia Minor. This latter, in March 1916, defined 
French and British zones and French and British 
spheres of influence. "In a letter of May 15th," 
wrote the reporter of the Public Works Commission, 
"Sir Edward Grey requested that, in the zone which 
was to become French under the Sykes-Picot Agree- 



226 THE WORLD-STRUGGLE FOR OIL 
ment, it should be understood that all existing con- 
cessions, navigation rights, and the rights and privi- 
leges of all British religious, educational and medical 
establishments would be maintained." 

In a letter of the same date, M. Cambon agreed. 
By these means France was tricked, for doubtless M. 
Cambon was not aware at the time that, from June 
26, 1914, a British firm, the Turkish Petroleum 
Company, had obtained from the Turkish Minister 
of Finance, Said Halim, the concession of all rights 
over oil discovered or to be discovered in the vilayets 
of Mosul, Basra, and Bagdad/ Now, it was just 
from these three vilayets that the oil in the French 
zone came; so much so that, by the interpretation of 
the Franco-British Agreement of May, 1916, France 
was completely ousted from the oil production of 
Mesopotamia. 

Thanks to Henry Bérenger, a new agreement was 
concluded between him and Mr. Walter Long in 
March and April, 1919. Henry Bérenger recalled the 
agreement made before 1914 between Said Halim and 
the Bagdad Bahn, the railway company which had 
passed into French and British hands since the Ger- 
man defeat. The Turkish Petroleum Company was 
subject to this agreement, because the railway passed 

^ If he knew of it, there can never have been so serious a diplo- 
matic blunder. 



BRITAIN WINS OVER FRANCE 227 

through its oil-fields. Rights had been reserved for 
the Germans over half the production of Mesopo- 
tamia. "Thus, France obtained 25 per cent, as her 
half-share of the German rights." Unfortunately, 
this agreement met with a certain opposition at the 
Quai d'Orsay. It was held up, and M. Clemenceau 
did not sign it, "because, on February 8, 1919, after 
we had ceded Mosul and Palestine at the request of 
Mr. Lloyd George upon the threefold condition of 
the oil agreement — ^whole-hearted British support of 
the French point of view in the event of American 
objections — and finally the exact fulfilment of the 
1916 treaty concerning the frontiers of Syria, Mosul 
excepted, our British friends presented to us a map 
which deprived us of one-third of Syria in addition." 

Such was the explanation given to the Chamber by 
André Tardieu! A certainty was sacrificed for a 
possibility. M. Henry Bérenger strove to have the 
treaty revived, and on December 21st signed a new 
contract with Sir Hamar Greenwood, the British 
Minister in charge of oil questions, very similar to 
the Long-Berenger Agreement, except in the matter 
of native interests. This time, however, Lloyd 
George, not considering it advantageous enough to 
Britain, refused to sign it. 

Such was the situation when France went to the 
Conference of San Remo. 



228 the world-struggle for oil 

The San Remo Agreement 

It was not merely the oil deposits of Mesopotamia 
that France, in return for a lowly and subordinate 
participation in British control, was abandoning to 
Britain — as they would have had the Chamber be- 
lieve at the time of the noisy debate upon Mosul — 
but the whole of French oil interests, present and 
future, whether in the colonies or abroad. The first 
article of the agreement which Mr. Lloyd George and 
the real "Grand Master" of British oil policy. Sir 
John Cadman, presented for signature, stipulated, 
it is true, that "this memorandum relates to the fol- 
lowing States or countries: Rumania, Asia Minor, 
territories of the old Russian Empire, Galicia, French 
Colonies," and that the agreement might be extended 
to other countries by mutual consent; but, of British 
territories, only "British Crown Colonies" were 
opened to French co-operation, and then only "so 
far as existing regulations allow." Thus, London 
kept an easy method of evasion in reserve. Now, 
though the British Empire counts many "Dominions," 
there is not nowadays a large number of "Crown 
Colonies." The former German Colonies themselves, 
with one exception, have been handed over to the 
Commonwealth of Australia, or to New Zealand, or 
to the Union of South Africa. Thus, apart from 
former German East Africa and a small strip of the 



BRITAIN WINS OVER FRANCE 229 
Cameroons which France ceded to Nigeria, these will 
not be open to "Franco-British co-operation." 

There is but a single country in which the San 
Remo Agreement has provided equal treatment for 
France and Britain, at least in theory; that country 
is Rumania. 

Rumania is the State in which French interests 
were the most important; they would be increased 
still more by the spoils of the Deutsche Bank and the 
DiscontO'Gesellschaft, Accordingly, the two Gov- 
ernments pledged themselves to support each other 
in acquiring concessions which belonged to seques- 
trated companies, such as the Steaua Romana, Con- 
cordia, and Vega, and in obtaining fresh concessions. 
"All shares belonging to former enemy concessions 
which can be secured and all other advantages de- 
rived from these negotiations shall be divided, 50 
per cent, to British interests and 50 per cent, to 
French interests. It is understood that in the com- 
pany or companies to be formed to undertake the 
management and the exploitation of the said shares, 
concessions, and other advantages, the two countries 
shall have the same proportion of 50 per cent, in all 
capital subscribed, as well as in representatives on 
the board, and voting power." 

This equality was not a favour, for the French 
capital invested in Rumanian oil was at least as im- 
portant as that of Britain. 



230 THE WORLD-STRUGGLE FOR OIL 

In the territories of the old Russian Empire, where 
French interests are much less important than British 
interests, an equal distribution is not provided for: 
it would have been to the advantage of France. But 
it is stated that the two Governments will give their 
"joint support" to those of their nationals who make 
"joint efforts" to obtain concessions, and to export 
and deliver oil. Now, at the present moment, such 
efforts are being made by the Royal Dutch-Shell 
alone, which is even going to the length of proposing 
to the Soviet Government to restore the oil industry 
of Russia, if it is granted extra-territoriality for its 
concessions. 

In Mesopotamia, "the British Government under- 
take to grant to the French Government 25 per cent, 
of the net output" if the Mesopotamian oil-fields are 
developed by Government action. If a private com- 
pany is used, the British Government will place at 
the disposal of the French Government a share of 
25 per cent, in such company. Thus, in the one case 
France will be simply a consumer of oil, or in the 
other she will be both a producer and a consumer. 
The negotiators took care to have inserted that "the 
price to be paid for such participation shall be no 
more than that paid by any of the other participants." 
They remembered the price at which British coal 
had been sold them! 

"It is also imderstood that the said petroleum com- 



BRITAIN WINS OVER FRANCE 231 

pany shall be under permanent British control'* 
Should a private company be constituted, "the native 
Government or other native interests shall be allowed, 
if they so desire, to participate up to a maximum of 
20 per cent, of the share capital of the said com- 
pany, the French contributing one-half of the first 
10 per cent, of such native participation." With this 
system, as M. Delaisi has observed, France would sub- 
scribe a third of the capital, upon which condition 
she would have a right to a quarter of the oil pro- 
duced. 

If Britain consented to give France this share of 
the Mesopotamian oil, when, according to the docu- 
ment which Sir Edward Grey had got M. Paul Cam- 
bon to sign on May 15, 1915, she was under no obli- 
gation to give anything at all — the more so because 
France had given up Mosul without previously lay- 
ing down any conditions about the oil ^ — it was be- 
cause the present carried with it as a counterpart 
privileges and exemptions granted by France to the 
Anglo-Persian, which will have access, if it so de- 
sires, to the Mediterranean by pipe-lines across Syria. 
It will even be able to build railways, refineries, and 

1 One of two things should have been done: either Mosul should 
only have been given up against the promise of a large share of its 
production, or Upper Mesopotamia should have been retained, be- 
cause, even if its deposits had been exploited by British companies, 
the presence of France would have forced them to reckon with 
her. 



232 THE WORLD-STRUGGLE FOR OIL 

reservoirs there, and France is pledged to guaran- 
tee the security of its installations in her zone with- 
out levying any tolls. No export or transit dues are 
to be levied upon the oil which it sends through 
French ports. 

Finally, while the British Government only opens 
its "Crown Colonies" to French penetration, and in 
these restricts the favour to the "territories of the 
Crown," ^ with the further condition that the con- 
cessions in question are not already the subject of 
negotiations initiated by private interests, the French 
Government threw open the whole of its great colo- 
nial empire, and undertook to facilitate the acqui- 
sition of concessions by "any Franco-British group 
or groups of good standing." It simply called at- 
tention to the fact that Parliament had resolved that, 
in companies formed for the exploitation of colonial 
deposits, French interests should be represented in 
the proportion of 67 per cent. But the French Par- 
liament was under an illusion: in order to have con- 
trol of a business, it is not sufficient to hold one-half 
or three-quarters of the shares. Every one knows that, 
in France, shareholders rarely attend the general 
meetings which appoint the directors. Still less will 
they undertake the journey to London, where the head 
office will almost always be located. They do not 

1 This phrase does not appear in the official English text of th« 
San Remo Agreement. — Translator's Note, 



BRITAIN WINS OVER FRANCE 233 

even go to The Hague; this explains why they have 
no influence in the Royal Dutch, although they hold 
more than half its capital. The last increase of 
capital of the Royal Dutch was voted by forty-four 
persons, representing 218 votes. People did not al- 
low their private arrangements to be disturbed by 
an event which might have notable results upon the 
world-future of this trust: not one share in 1,110 
was represented. 

However, Britain did not wait till the San Remo 
Agreement was signed before grasping the oil-fields 
of the French colonial empire: she gained possession 
of them while the War was being fought! 



CHAPTER XX 

GREAT BRITAIN AND THE OIL- 

FIELDS OF THE FRENCH 

COLONIAL EMPIRE 

As early as July 10, 1914, M. Clémentel had ap- 
pealed to the French Government to prevent foreign 
Powers from laying their hands upon the oil deposits 
of Northern Africa. "At a time when Britain is 
pursuing in Persia a policy which is well known to 
you, and when oil concessions are, at bottom, the 
chief cause of the troubles in Mexico," he exclaimed, 
"the French Government cannot permit its repre- 
sentatives in Algeria, or in Morocco, to give deposits 
of oil to all comers." 

The Government paid no attention to this, for, two 
years later, Lord Cowdray (Pearson) had obtained 
a concession of 730,000 hectares for prospecting, and 
101,000 for immediate exploitation. These exten- 
sive territories were bounded on the east by the rail- 
way from Ténès to Orléansville, on the south by the 
railway from Orléansville to Relizane and thence to 
Saint-Lucien, on the west by the lines from Saint- 
Lucien to Saint-Barbe and from Trelat to Gran, and 

234 



BRITAIN AND THE OIL-FIELDS 235 

on the north by the sea between Oran and Ténès. 
And when, on November 9, 1916, M. Ernest Outrey 
submitted to the Chamber documents demonstrating 
how the French Government had proceeded to hand 
over the oil riches of Algeria without consulting 
Parliament, M. Marcel Sembat, the Minister for 
Public Works, deemed the following reply a com- 
plete justification: 

"If you are dealing with lands where the presence 
of oil is doubtful and where, according to technical 
experts, you would have to spend many millions upon 
prospecting, and if a company says to you 'Here are 
our guarantees; we have competent technicians, and 
we are prepared, under Government control, to spend 
four million francs upon prospecting,' what are you 
to do?" 

When the Pearson firm addressed its request for 
a concession to the French Government, on January 
18, 1915, the Minister, in forwarding it to the Gov- 
ernor of Algeria, did not hesitate to write that "the 
question would have to be submitted to Parliament." ^ 

But he was not long in changing his opinion, and, 
in order to dispense with Parliament, it was decided 
to deal with the request "by decree enacted by the 
Council of State." ^ 

1 Letter from the Minister to M. Lutaud, Governor of Algeria, 
January 27, 1915. 



2 Ibid., June 26, 1916. 



f^? 



^::if«. 



236 THE WORLD-STRUGGLE FOR OIL 

On August 18, 1916, before any final decision had 
been taken upon the matter, M. Marcel Sembat in- 
structed the Governor of Algeria "to give the petition- 
ing company every facility for the sale of oil ob- 
tained as a result of the investigations which it may 
undertake." And, on October 11th, M. Lutaud for- 
warded to him the following letter from the Prefect 
of Oran, which pointed out an ingenious method of 
evading the law upon concessions: 

"In conclusion, M. Dussert (Engineer-in-Chief for 
Mines at Algiers) proposes, if the Administration 
should decide not to present a Bill to Parliament, a 
different solution from that contemplated by the 
Minister for Public Works. He suggests that an im- 
mense mining concession, covering the whole of 
Dahra, the Bel-Hacel range, and the forest of Mouley- 
Smai'l, should be granted to Algeria, leaving the 
colony, from the date of this concession, to give the 
oil company a three years' lease, renewable for two 
years, which could be made permanent as soon as 
the company had selected the lands which it wished 
to retain." 

There followed a report by M. Dussert upon the 
petition: "This petition is formulated upon en- 
tirely abnormal conditions; the boundaries to which 
it would apply would enclose an area fifteen times as 
great as the concessions which are usually granted^ 

What the English desired above everything was to 



BRITAIN AND THE OIL-FIELDS 237 

get a grip on these vast lands so as to keep off their 
American rivals, should important sources of oil be 
found there later on. The production of oil in Al- 
geria is still insignificant, though it increased almost 
tenfold between 1914 and 1917. Henceforward, the 
majority of companies operating there, the Société 
co'intéressée des Pétroles algériens, the Société algé- 
rienne des Pétroles de Tiliouanet, the Société 
d'Études, de Recherches et d^ Exploitation des Pétro- 
les en Algérie, are invariably British. Lord Murray 
has even been ingenious enough to have inserted in 
the articles of association of the last-mentioned com- 
pany a clause which nullifies all the precautions taken 
by the legislature: two-thirds of the directors are to 
be French, as the law requires; the managing direc- 
tor is to be French; but "the Board may in addition 
by special resolution confer powers upon such per- 
sons as it deems fit and for such purpose or purposes 
as it may determine." ^ This little paragraph alone 
changes the whole aspect of these articles of associa- 
tion, which, on the surface, appear to conform so 
closely with the requirements of Parliament. The 
company will entrust its interests to whomsoever it 
wishes. 

But Britain has not been content with seizing the 

1 Article 27 of the articles of association of the Société (TEtudes, 
de Recherches, et d'Exploitation des Pétroles en Algérie^ registered 
at Algiers, December 18, 1918. 



238 THE WORLD-STRUGGLE FOR OIL 
deposits in Algeria.^ She has also installed her- 
self in Madagascar. Since June, 1921, the Royal 
Dutch has been making a minute inspection of the 
fields of Sakalava.^ 

And if the hope to which M. Launay gave ex- 
pression at the Academy of Sciences is realized, and 
oil is found in Indo-China, Laos, Tonkin, and Annam, 
the Royal Dutch-Shell will probably waste no time in 
gaining possession of deposits so near its base. 

1 The majority of firms operating in Algeria are British companies 
registered under French law, just as the Mexican Eagle (El 
Aguila) is a British company registered under Mexican law. The 
most important is the Société co-intéressée des Pétroles algériens, 
which Pearson founded with a capital of ten million francs, and in 
which he has retained a considerable interest. But the one which has 
given the best results is the Société algérienne des Pétroles, de Tili- 
ouanet, whose oil yields 15 per cent, of petrol, 65 per cent, of illu- 
minating oil, and 20 per cent, of parafi&n residues. 

2 The Royal Dutch-Shell contemplates the formation of a French 
company with a capital of twenty-five million francs for the ex- 
ploitation of the oil deposits of Madagascar. This company would 
take over the concessions of the Sakalava Proprietary Oilfields, 
which is already working there. 



CHAPTER XXI 
THE STANDARD AND FRANCE 

On May 17, 1921, Mr. Hughes Wallace, the United 
States Ambassador, handed to France an official 
statement of his Government's grievances. He 
pointed out all the obstacles which American com- 
panies encountered in France, and asserted that Brit- 
ish companies did not meet with the same difficulties. 

Now, as Mr. Hughes Wallace observed, France 
needed ten times the quantity of mazut that she was 
getting, and many French factories were idle for 
want of fuel. Thus there was room in the French 
market for both British and American firms. Mr. 
Wallace therefore asked that they should be treated 
on an equal footing. 

M. Laurent Eynac, under whom the Commissariat 
for Petrol had been re-established, without mention- 
ing the Agreement which bound him to the British, 
replied by putting all the blame on the inevitable de- 
lays of official inquiries, which were "the same for 
everybody." 

But a few days afterwards. Le Temps published 
an incomplete summary of the San Remo Agreement; 

239 



240 THE WORLD-STRUGGLE FOR OIL 

it did not give the official text till July 25th. 

The United States now understood the reasons for 
the attitude of silent hostility which France had 
adopted towards American oil companies. The San 
Remo Agreement aroused grave anxiety in Washing- 
ton. President Harding displayed very clearly his 
intention not to tolerate such a policy. He made 
representations to the British and French Govern- 
ments and protested against the exclusion of America 
from the Franco-British partition of the oil of 
Asia; he declared firmly that the British monopoly 
countersigned by France at San Remo was not to be 
tolerated, and that United States citizens were not 
to be ousted through the complacency of France 
towards the imperialism of London. The Washing- 
ton Post wrote as follows: "Oil is indispensable to 
America, and American companies only provide in- 
adequate quantities at excessive prices. The com- 
placent arrangement between France and Britain for 
the partition of the oil resources of lands which are 
not in their possession is subject to revision upon the 
request of the United States, intent on the pursuit of 
their naval policy." 

By subservience to British policy in the East, 
France was to reap the enmity of the United States. 
Its effects were soon felt, for, at the Brussels Con- 
ference in the following October, the "unofficial" 
delegate of the American Government declared that 



THE STANDARD AND FRANCE 241 

his country would not participate in any international 
loan for the capitalization of the German indemnity. 
This was one hope definitely lost, upon which France 
had long been relying. The same thing happened 
with the repayment of the French debt to the United 
States: France fondly hoped that the Americans 
would renounce what they had lent her during the 
War, just as Louis XVI renounced the millions which 
he advanced to their infant Republic, but when Presi- 
dent Harding was sounded indirectly upon the sub- 
ject, he returned a pointed refusal. 

The French Government recognized somewhat 
tardily the mistakes which it had committed, and, 
when Mr. Bedford came to Paris in the autumn to 
found the Standard Franco- Américaine, it allowed 
M. Jules Cambon to accept the presidency. To get 
round the eviction order which has been served upon 
them in the Near East and the French colonial em- 
pire, the United States adopted the ingenious method 
of founding a French company, which will have just 
as good a right as the Société pour VExploitation des 
Pétroles to share in any concessions reserved to 
France. Abandoning the high-handed policy, which 
played the game of its opponents, the Standard^ upon 
the advice of Walter Teagle, decided to employ the 
insinuating methods of the Anglo-Dutch trust. In 
France, the Royal Dutch relied upon the Banque de 
r Union Parisienne, the Banque Bénard, the Banque 



242 THE WORLD-STRUGGLE FOR OIL 

Rothschild, and also, it is said, the Crédit Lyonnais. 
The Anglo-Persian had the support of the Banque 
Transatlantique and the Banque de la Seine, The 
Standard now allied itself with the Banque de Paris, 
the most powerful of the commercial banks in 
Europe. 

51 per cent, of the capital of the Standard Franco- 
Américaine (20 million francs) was subscribed by 
the Banque de Paris et des Pays-Bas, and 49 per 
cent, by the American Trust. And in the constitu- 
tion of the Board, the Standard acted much more 
prudently than the Royal Dutch: five out of eight 
directors were French. 

Mr. Bedford, the actual head of the Standard Oil, 
went so far as to content himself with the vice- 
presidency, leaving the first place to a Frenchman. 

The establishment of the Standard Franco-Améri- 
caine at this time was the more hazardous because 
M. Laurent Eynac, taking up the former Klotz- 
Bérenger program, was working for a definite State 
monopoly of the purchase and importation of oil. 
But the French market is of such importance to the 
Standard Oil in its struggle with the Royal Dutch that 
it preferred to take all the risks. "France," Mr. 
Bedford said, "on account of its geographical situa- 
tion, is naturally a field for competition among all 
great companies." The Standard desires to have its 
place there. It proposes to resuscitate the refining 



THE STANDARD AND FRANCE 243 
industry, which has almost passed out of existence, 
and set up great warehouses in the ports to receive 
the crude oil; and it would even go to the length of 
installing special reservoirs of petrol for supplying 
motor vehicles in the neighbourhood of the munici- 
pal toll-houses. 

Events have turned in its favour, for the idea of 
monopoly is to-day thoroughly discredited in France. 
M. Laurent Eynac was obliged hurriedly to with- 
draw his proposal owing to the commotion which it 
aroused. An extremely violent Press campaign 
broke out, and the political and diplomatic dangers 
of the San Remo Agreement became plain to every 
eye. 

The present diplomatic situation is strangely like 
that of Fashoda. In 1905, France was at one of the 
turning-points of her history: she had to choose be- 
tween the two Powers which had hitherto been her 
hereditary enemies. She decided to follow the 
British, and not the German, policy. Will she have 
to choose between the British policy and the Ameri- 
can policy— between the two countries which helped 
her to emerge victorious from the great world conflict? 



^Wrr^ 



CHAPTER XXII 

CONCLUSION 
The World in 1923 

The political independence of a people may some- 
times be nothing but a sham. France, having 
neglected to obtain her share in the division of the 
world's oil, is to-day in a position of dependence 
upon Britain and America. If, to-morrow, she had 
to defend herself against a fresh attack, her tanks, 
her aeroplanes, her submarines, and the whole of 
her supply services could only function by consent 
of her Allies. Even with the first army in the world, 
France could be victorious only if Britain and the 
United States permitted.^ 

Already in time of peace, nations without oil were 
in a position of considerable inferiority, in view of 
the hundreds of uses to which oil is put in industry, 
and especially in the important sphere of the trans- 
port and distribution of commodities. There is no 
true independence for a people but that which is as- 

1 Herein lies the explanation of the undecided policy of France 
since the signature of the Treaty of Versailles. 

244 



conclusion: world in 1923 245 

sured economically and financially. Military su- 
premacy is only the happy result of proper efforts un- 
dertaken to attain it. During the War, such independ- 
ence was to be desired for France even more than 
during peace: it would have avoided the heavy debts 
which she incurred to her Allies, and it would have 
enabled her to exploit herself the resources at home 
and in the colonies which she has been compelled to 
hand over to foreigners. 

Before the War, France consumed more than 
400,000 tons of oil a year. To-day, she requires 
1,500,000, and the oil wells of Alsace, which the 
Treaty of Versailles has restored to her, produce 
only 60,000 tpns, and Algeria 3,000-4,000 tons.^ 
Thus, she is obliged to pay the foreigner nearly 
2,000 million francs a year in order to obtain the 
oil which she lacks. 

Nevertheless, there is almost certainly oil in 
France, in the Ain valley, the Jura Mountains, 
Auvergne, and the Landes; there is oil in the French 
possessions in Northern Africa and in Madagascar; 
there must be some in the Cameroons, in Indo-China, 
and in New Caledonia. Is it not abnormal that the 
West Indies and Guiana, when in British or Ameri- 
can hands, produce oil, but when in French hands 

1 But she also possesses at Les Telets, near Autun, bituminous 
shale which, in 1917, produced 103,400 tons, yielding 75 litres of 
oil per cubic metre. 



246 THE WORLD-STRUGGLE FOR OIL 

never yield anything? The same applies to Oceania. 
But there is no reason to be astonished at this; for, 
under the legislation which was in force since 1810, 
no Frenchman had any inducement to search for oil. 
This explains the epigram of one of the most im- 
portant members of the French cartel, when he de- 
clared that "the greatest misfortune that could hap- 
pen to an oil magnate in France would be to discover 
a spring of oil." Happily, on March 22, 1922, the 
Chamber altered this state of affairs by granting, as 
was suggested in the first edition of this book, the 
guarantees which are indispensable to prospectors. 
Till that year, the exploitation of deposits which a 
prospector had discovered might be conceded to any 
foreign company which came on the scene at the 
right moment to reap the fruits of his labours. Re- 
payment of money laid out was highly problemati- 
cal, for the local authorities used to grant this only 
to those responsible for the final investigations lead- 
ing directly to the discovery of oil. Now, hunting 
for a "wild cat" — ^the American term for a boring — 
is a very risky operation, which entails considerable 
expenditure. In a protest submitted to the Ministry 
of Public Works by five Algerian colonists, who had 
carried out explorations and borings upon land for 
which a concession was now asked by a company of 
foreign origin, the colonists stated by affidavit that 
they had spent 870,000 francs upon 14 borings and 



CONCLUSION: WORLD IN 192 3 247 
85 wells, of which seven alone were actually produc- 
ing a few tons of petroleum. Even so, the propor- 
tion of seven successful wells out of 85 is rather high. 
O'Donnell, the president of the American Petroleum 
Institute, estimates that, out of every hundred bor- 
ings made, 98 are unprofitable. But for fifty years 
the 2 per cent, which succeeded sufficed for the con- 
sumption of the world. 

The policy of France in the Near East since the 
War has been simply one long suicide. Little by 
little, French diplomacy has abandoned everything 
that was promised by the agreements of London. 
While the San Remo Agreement marked the complete 
downfall of France in Asia, it considerably strength- 
ened the position of Britain: not only does it recog- 
nize all rights acquired by Great Britain, including 
those which, as in Mesopotamia, rested upon a highly 
insecure foundation, but it gives British capitalists 
an important opening in French colonies which are 
still almost untouched, whereas the corresponding 
advantages which it confers upon France in some (not 
all) British colonies apply to territories where the 
most desirable fields are already being exploited. 

France is paying for her past inertia. 

If the Allies have to thank the two great trusts for 
enabling them to get their supplies of oil during the 
War, the latter in return have notably increased their 
power. The defeat of the Central Empires has 



248 THE WORLD-STRUGGLE FOR OIL 
brought about the ruin of their rival, the European- 
ische Petroleum Union, and the destruction of the 
network of interests which Germany had succeeded 
in spreading over Galicia, Rumania, Russia, and 
Turkey. 

The ambition of the Royal Dutch since it linked 
its fortunes with those of the British Empire knows no 
bounds. Its latest success at Djambi has now spurred 
it to ask the Netherlands Government for a monopoly 
of exploitation in all the Sunda Islands. It has al- 
most reached the point of eliminating its American 
rival completely from the Far East. 

The Standard retaliates, and sends prospectors 
wherever they are admitted — to Abyssinia (January 
1921), Peru, Colombia, the Philippines, Bolivia. 
It has gained a footing in the Azores, and in July 
1922 was trying in Ecuador to acquire control of the 
Lobitos from the Anglo-Ecuadorian, It is actively 
cultivating the Government of Czecho-Slovakia for the 
grant of exclusive rights of exploitation, and it has 
obtained from the Italian Government a concession 
for the oil deposits of San Saba, near Trieste. But 
the Chinese Government has refused the permanent 
agreement which it proposed. 

Walter Teagle wishes the Standard, like the Royal 
Dutch-Shell, to become a producer of oil and not to 
content itself with the mere control of refining and dis- 
tribution. But the time is long past when Rocke- 



conclusion: world in 1923 249 

feller controlled 95 per cent, of the sales of oil in the 
United States. Although the StandarcTs capital has 
risen to $1,310,000,000 and the number of its sub- 
sidiaries to 62 it now refines only 49 per cent, of 
American oil. In the United States there are forty- 
four independent companies, representing a capital 
of two thousand million doUars, which carry on, not 
only the extraction, but also the transport, refining, 
and sale of oil. Still more serious, the Anglo-Dutch 
trust has succeeded in establishing itself on the terri- 
tory of the Union itself; at a recent congress of the 
American Petroleum Institute, Walter Teagle showed 
that the Royal Dutch-Shell drew 43 per cent, of its 
total production from the United States. Be that as 
it may, the Standard, in America, is always regarded 
as the great national champion, upon which falls the 
task of fighting the Royal Dutch and the British Em- 
pire, which have laid plans for depriving the United 
States of their supremacy in oil. Who attacks the 
Standard attacks the Washington Government di- 
rectly. And in Europe it still occupies a strong posi- 
tion through its various subsidiary companies. The 
struggle for oil is no longer a rivalry between great 
trusts; it is a struggle between nations. 



^^n- 



/^^j^iii^ 



BIBLIOGRAPHY 

FRANCE 

Agence Économique et Financière (1920-21). 

Annales Franco-Helléniques (1920). 

Bérenger, Henry, Le Pétrole et la France (1920). 

La Politique du Pétrole (1920). 
Brésil (1920, "Le Pétrole en Amérique latine"). 
Capital (1914). 
Courrier des Pétroles. 
Delaisi, Francis, OU: Its Influence on Politics (1920: 

English translation, 1922). 
Économiste Européen (1906-21). 
Épargne (1919). 
Europe Nouvelle (1921). 
Financial Bulletins of the Société Générale, 
France Économique et Financière. 
Illustration Économique et Financière. 
Information (1906-21). 
Le Page, U Impérialisme du Pétrole (1921). 
Messager de Paris (1919-20). 
Moniteur Économique et Financier. 
Mouvement Financier (1909). 
Nouvelles Économiques et Financières. 
Parliamentary publications: Reports presented for the 

Customs Commission by the Duc de la Trémoïlle 

(March 1919), and Senator Jean Morel (June 1919). 
Report presented for the Finance Commission by M. 

Charles Leboucq (June 1920). 
251 



252 THE WORLD-STRUGGLE FOR OIL 
Documents submitted to the Sub-Committee on Oil of the 

Chamber of Deputies (1920). 
Producteur (1921). 
Revue des Deux Mondes (1st April, 1920, Contre- Amiral 

Degouy, "Le Pétrole et la Marine"). 
Revue Financière (1911-21). 
Revue Politique et Parlementaire (August 1920). 
Revue Universelle (October-December 1920). 
Vie Financière (1914-21). 
Vie Économique et Financière (1912). 

GERMANY 
LuDENDORFF, My Memoirs. 
PoTONiE, Entstehung der Steinkohle, des Petroleum, u.s.w, 

(Berlin, 1910). 
Vossische Zeitung (1913, "The Troubles in Mexico"). 

BELGIUM 
Revue Belgo-Roumaine (1920, "Le Pétrole en Roumaine"). 
Revue Économique Internationale (1921). 

GREAT BRITAIN 
Daily Graphie (1913, "The Troubles in Mexico"). 
Daily Mail (1920). 
Engineering and Mining Journal, 
Financial News (1912-21). 
Financial Times (1921). 
Financier. 

Lord Fisher's Letters to the Times (September 1919). 
Manchester Guardian (1921). 
Petroleum Review (1910-21). 
Petroleum Times (1920). 



BIBLIOGRAPHY 253 

UNITED STATES 
Barnes, The Romance of Persian Oil. 

The Standard Oil Companies (1920). 
Brooklyn Eagle (1920-21). 
Nation (1921). 
Petroleum Magazine (1921). 
Public Ledger (Philadelphia). 
Reports of the State Department for Foreign Affairs. 

Hepburn Committee. 

Inter-State Commerce Commission. 

Director of the Bureau of Mines to the Secretary of 
State for the Interior. 
Statistics of the Geological Survey. 

Smithsonian Institute. 

Independent Oil Producers' Agency. 

American Chamber of Commerce in Paris. 

National Bank of Commerce of New York. 
Washington Post (1919-20). 
World's Work {1920). 

MEXICO 

Boletin del Petroleo (1920-21). 

Statistics of the Technical Commission on Petroleum of 
the Ministry of Commerce, Industry and Labour. 



INDEX 



Abyssinia, 248 

Africa, 42, 245 

Aktien Gesellschaft fiir Petro- 
leum Industrie, 73, 74 

Alaska, 40 

Algeria, 234 

Alleghanies, 28 

Alpine Railways, 35 

America, 66, 78, 239, 240 et pas- 
sim 

American Navy, 19, 40 

American Petroleum, 51 

Anglo-American Oil Co., 51 

Anglo-Egyptian Oilfields, 74 

Anglo-Persian Oil Co., 87, 93, 
151 et passim 

Anglo-Saxon Petroleum, 62, 74 

Anglo-Swedish Oil Co., 73, 74 

Antipodes, 72 

Apsheron, 26 

Aquila Franco-Romana, 98 

Argentine, 140, 143, 163 

Arizona, 69 

Asia, 72 

Asia Minor, 225 

Asiatic Petroleum Co., 74 

Associated Oil, 80 

Astra Romana, 75, 98 

Australia, 42, 140 

Austria, 35 

Automobilism, 34 

Aviation, 34 

Azores, 72, 248 



Bagdad, 26 



Baku, 24, 29, 73 

Banks Interested in Oil, 97, 98, 

241, 242 
Batavia, 85 

Batavian Oil Company, 62, 74 
Bibliography, 251 
Bituminous Shale, 40 
Black Sea, 72 
Black Sea Co., 98 
Bolivia, 248 
Borneo, 61, 68, 75 
Brazil, 144 
British Controlled Oilfields, 11, 

143, 166 
British Crown Colonies, 232 
British Government, 89, 98, 133, 

147, 152, 153, 157, 168 
British Imperial Oil Co., 75 
British Oil Policy, 158, 162. 182, 

184, 215 
British Pearson Syndicate, 80 
British Petroleum Co., 75 
British Tanker Co., 75 
Burlington Investment Co., 76, 

90, 130 
Burmah Oil Co., 98, 131, 132 

California, 68, 152 
Californian Oilfields, 76 
Cape Verde Islands, 72 
Carib Syndicate, 129 
Caribbean Petroleum, 75 
Carpathians, 98 

Cartel of Ten, 52, 201, 208, 
212 



265 



256 



INDEX 



Caspian Sea, 72 

Caucasus, 22, 45, 78, 97 

Central Refining Co. of Pitts- 
burg, 49 

Ceram Oil Syndicate, 75 

Ceram Petroleum, 75 

China, 26, 65, 68, 92, 248 

Coal, 12, 16, 17 

Colby Note, 168 

Colombia, 129, 152, 248 

Colon Development Co., 90, 129 

Colorado, 40, 69 

Commercial and Industrial Com- 
panies of Caspian and Black 
Seas, 75 

Companies Controlled by Royal 
Dutch, 73 

Companies forming Standard Oil 
Trust, 49 

Concordia Co., 229 

Control of the Seas, 11, 18, 178 

Costa Rica, 129, 144 

Curaçao, 71 

Curaçao Petroleum, 76 

Czecho-Slovakia, 248 

Dakota, 69 

Danske Petroleum Altieselskabet, 

51 
Danube Navigation Co., 99 
D'Arcy Exploration, 137 
Deutsche Amerikanische Petro- 
leum Gesellschaft, 51 
Deutsche Bergin A. G., 73, 74 
Deutsche Erdol Aktien Gesell- 
schaft, 98 
Deutsche Petroleum Verkaufs 

Gesellschaft, 98 
Diesel Engine, 14, 34, 
Dissolution of Standard Oil, 54 
Distribution of Oil in Europe, 41 
Distribution of Oil in New 
World, 40 



Doheny Interests, 45, 80 
Dordesche Petroleum Company, 

75 
Dordesche Petroleum Industrie, 

75 
Dutch Indies, 13, 77 

Eagle Oil Transport, 76 

East Indies, 152 

Ecuador, 144 

Egypt, 42, 152 

Empire Refining Company, 49 

Erdol Industrie Anlagen Gesell- 
schaft, 103 

Erdol und Kohle Veranderung 
Aktien Gesellschaft, 73, 74 

Europeanische Petroleum Union, 
79 

Exhaustion of Oil-fields, 176 

Far East, 65, 66, 80 
Financial Groups, 78 

Galicia, 51, 78 
Galician Companies, 99 
General Asphalt Company, 71, 

76 
General Leasing Act, 180, 181 
Genoa Conference, 185 
German Battleships, 19 
German Submarines, 15 
Grosny Sundja Oilfields, 75 

Hague Conference, 93 

Home Light Oil Company, 75 

Hungarian National Petroleum 

Co., 139 
Hungary, 137 

Imperial Oil Co., 184 

Increase in Consumption of Oil, 

33, 34 
India, 90, 152 



Inter-Allied Petroleum Confer- 
ence, 107, 153 

Internal Cumbustion Engine, 14, 
15 

International Oil Company, 51 

Italian Company for the Import 
of Oil, 75 

Java, 63, 80 

Jugo-Slav Petroleum, 77 

Jugo-Slavia, 73 

Keystone Refining Company, 49 

Konzern Group, 99 

Kotoku Oilfields Syndicate, 76 

La Corona, 76 
Latakia Oil, 224 
LianosofF, 72, 76 
Limanowa, 98 
Lobitos, 248 
Louisiana, 70, 152 

MantasheflF, 72, 75, 197 
Market-price of Oil, 36 
Mazut, 14, 16, 37, 112 
Mazut Company, 75 
Mesopotamia, 158, 168, 230 
Mexican Eagle, 22, 71, 76, 121, 

151 
Mexico, 29, 30, 32, 70, 81, 113, 

114, 115, 125, 143 
Mineral Rights, 162 
Moebi Hid, 75 
Monopoly in Oil, 98, etc. 
Monroe Doctrine, 129 
Montana, 69 
Moreni, Region of, 30 
Mormons, 141 
Mosul, 10, 26, 223, 224 
Motor-traction, 38 

National Transit Company, 49 



INDEX 257 

Nederlandsche Indische Tanks 
Troomboat, 75 

Nevada, 69 

New Mexico, 69 

New Russian Standard Com- 
pany, 72 

New Shibaieff Petroleum Cor- 
poration, 75, 88 

New Zealand, 42, 141 

Nobel Properties, 73, etc. 

Norsk Encelska Mineralojeanie 
Colaget, 75 

North Caucasian, 75 

Oceania, 42 

Oil as Fuel, 13, 17, 19 

Oil Borings, 21, etc. 

Oil Lamp, Invention of, 28 

Oil Policy, 9 

Oil Springs, 21, etc. 

Oil Union of Oklahoma, 80 

Oklahoma, 80, 152, etc. 

Orleans Refining Company, 76 

Ownership of Land and Min^ 

erals, 116, 129 
Ozark Pipe-Line Corporation, 77 

Palestine, 161, 179 
Panama Canal, 70, 71, 130, 144 
Panama Canal Storage Co., 76 
Panuco, 70 
Persia, 133, 152 
Peru, 156, 248 
Philippines, 248 
Photogen, 77 
Poland, 45 
Polk Report, 163 
Producers' Associated Oil Com- 
pany, 50 
Protective Tariff, 89, etc. 

Railways, 35 

Royal Dutch, 45, 68, 77 



258 



INDEX 



Royal Dutch-Shell, 42, 59, 63, 73, 

81, 84, 130, 147, 151 
Roxana Petroleum Company, 69, 

76 
Roxana Petroleum Corporation, 

77 
Roxana Petroleum Maatschappij, 

76 
Rumania, 30, 45, 78, 102, 152, 

229, etc. 
Russia, 29, 30, 152, 186, 230 
Revolution of 1905, 30 
Bolshevik Revolution, 13 
Russia, Soviets, 73, 157 
Agreement between Shell and 

Soviets, 191 
Russian Standard, 75 

Salt Water in Oil Wells, 20, 122 
San Remo Agreement, 10, 165, 

169, 228, 239 
Sandstone, 23 
Shell Co. of California, 76 
Shell Group, 167 
Shell Marketing Co., 75 
Shell Transport & Trading Co., 

35, 61, 74 
Sherman Anti-Trust Law, 56 
Simplex Refining Co., 76 
Sinclair Oil Co., 45 
Societa Italo-Americana per Pe- 
trolic, 51 
Société Bnito, 75 
Société Générale des Huiles de 

Pétrole, 137 
Société Maritime des Pétroles, 

73, 77, 218 
Société Navale de l'Ouest, 137, 

219 
Société pour l'Exploitation des 

Pétroles, 74, 218 
Société pour le Vente du Pétrole, 

51 



Spain, 74 

Standard Franco-Américaine, 241 

Standard Oil Co., 9, 11, 42, 45, 
57, 65, 77, 86, 92, 130, 174, 
215, 221, 239 et passim 

Standard Oil Trust, 48 

Steaua Romana, 99, 140 

Submarines, 15, 104, 154 

Suez Canal, 72 

Sumatra, 63 

Sumatra Palembang, 75 

Sunda Islands, 59, 248 

Swenska Petroleum Altiebolage, 
51 

Tampico, 70 

Tampico-Tanuco Petroleum, 76 
Tank Steamers, 155, 209 
Tei-Koku (Japanese), 140 
Telegram from Qemenceau to 

Wilson, 104 
Texas, 69 

Tierra del Fuego, 40 
Treaty of Brest Litovsk, 103 
Treaty of Bukarest, 103 
Trinidad, 144, 152 
Trusts, 79 
Tsatouroff, 72, 76 
Turkey, 45 
Turkish Petroleum, 76, 98, 99, 

140, 223, etc. 

Union Oil of Delaware, 77 

United British Oilfields of Trini- 
dad, 76 

United British Refineries, 76 

United States, 9, 18, 29, 30, 32, 
34, 38, 45 et passim 

United States Pipe-Line Co., 50 

Ural Caspian Co., 75 

Utah, 40, 69 

Vacuum Oil, 51 



INDEX 259 

Vega Co., 229 War of 1914-1918, 12, 33, 101, 

Venezuela, 70, 71, 90, 144, 152 159, 210, etc. 

Venezuelan Concessions Co., 76 Washington Conference, 184, 185, 

etc. 
Vereinigte Benzinwerke, 75 World-consumption of Oil, 39, 

Virginia, 70 etc. 

Volley Pipe-Line Co., 76 World-production of Coal, 36, etc. 

World-production of Oil, 32, etc. 
Wages of Coolies, 13 W. V. Oil Co., 76